It is not very easy to find hot stock picks, because it is quite complicated process. When you would ask some professional investors for advice, You would find out that each of them may have different approaches. However, there are some general steps everybody should follow in order to minimize the risk of the investment. Below I share 3 most important steps for picking stock hot picks.
Step 1. You have to decide what strategy you will follow. If it is going to be long term or short term strategy. Be aware of the fact that this step is crucial as it will dictate what stocks picks you will put your money in.
For the long term strategy, look for stocks that have stable growth along with sustainable competitive advantages. Look for their historical performance over the past few months or even decades. Also, try to do S.W.O.T (Strength-weakness-opportunity-threat) analysis on the current company.
For short term strategy, look for stocks that started rising smoothly in their prices over the recent past . It is so called momentum trading and I strongly suggest that you try it first before you will move to other, more advanced short term strategies, like Contrarian Strategy (where you have to look at over-reactions in the stock market).
Step 2. Don’t lose time looking at high priced stocks that are out of your range and that are not following your investment frame and strategy. Instead, research stocks that pass your criteria and that are the best choice for you.
Step 3. Once You got your list with hot stock picks on it, you need to diversify them in order of their reward and risk ratio. You can do this by using Markowitz analysis for your portfolio.
These simple, yet proven to work steps should help you as you start making money in the stock market. You have basic knowledge now so you will not do any serious mistakes along the way. I am sure that with good research and practice you will make huge profit. Just focus on these steps, do them right and the reward will come soon!
