As traders looking for a shortcut, one question that I receive often is, “How do I choose which stock to trade?”
And even more so – how does a trader go about consistently picking the right stocks?
I find it to be a great question. I have a very Warren Buffett approach to this question.
- Trade companies that you know.
- Trade companies that you interact with often.
- Trade companies that have a clear business model and profit strategy.
Let’s explain. Let me take a company like Yum! Brands (NYSE: YUM). First, are you familiar with YUM? They own Taco Bell, KFC, and Pizza Hut. Well, depending on what part of the world you live in, the answer is probably yes. I don’t know about you, but I’m a giant fatty. I love food. I had Taco Bell about 3 days ago and I definitely have frequent interactions with YUM’s brands. Third, it’s obvious how YUM profits.
If we are talking consistency, these three keys are huge because there will continuously be opportunities on companies like WalMart, Best Buy, Apple, Facebook, Microsoft and so on, regardless of if you trade stocks, options, short term or long term.
And if you want a short ‘fourth’ secret tip, if the stock has average shares of more than 1,000,000 shares – it likely will be optionable and also better to trade consistently.
Personally, my plate as a full-time trader can be perfectly full each day focusing on just AMZN, AAPL, GOOGL, FB, TWTR, MSFT, YUM and NFLX. Day trading, swing trading, long term trading using options and/or stocks on all three time-frames, these 8 offer plenty of trading opportunities! Keep in mind, there are literally millions of stocks to choose from. At some point, you really have to be content. In trading, less is always more!
I hope this helps some! Once you have your winning stock formula and ‘go to’ consistent companies to trade, from there it’s all about solid technical analysis, creating your trading plan and following that plan!
Thanks for reading, my friends. Until next time, remember – love life, live life, and trade it!
