Investors always seek a winning strategy. However, finding such a strategy is easier said than done. When the markets are choppy marked by widespread global growth concerns, it is difficult for even an insightful investor to come up with a foolproof approach.
No matter how disciplined and systematic investors are, equity market volatility will always manage to get the better of them. While a few lucky ones rake in the moolah, others fall victim to ad hoc strategies.
One could resort to commonly used techniques to find beaten down stocks that have the potential to recover faster than others. However, even such investment choices bear the risk of disappointment. Particularly, one could be stuck in a value trap if the hidden weaknesses in selected stock are not identified.
So, wouldn’t it be a safer strategy to look for stocks that are winners currently and have the potential to gain further?
Here’s how to execute it:
One should primarily look for stocks that have recently been witnessing price increase. Actually, stocks seeing price strength recently have a high chance of carrying the momentum forward.
If a stock is continuously moving higher, there must be a good reason for the rise or else it probably would have fallen like the losers. So, looking at stocks that have already won the game and are capable of beating the benchmark that they have set is rational.