Sunday, January 10, 2010

Stock Market Investing For Beginners Using The IBD 200

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Since I started this site, I've spent some time talking about stock market investing for beginners and how you need to manage your own investments. I've also taken some time to answer some reader questions. One thing that I haven't done for awhile, is continue the development of my investment strategy. If you have read any of my articles, you know that I lean towards being a growth investor and am a big fan of William O'Neil's CANSLIM strategy. I read the Investor's Business Daily and keep an eye on the direction of the market. Based on his teachings, I've become pretty comfortable with what follow through days are and also know that I want to invest when the market is in a confirmed uptrend. The next step though, is creating a list of stocks to put on my watch list. The question is where do you begin your stock hunt?

There are thousands of stocks to choose from on the NYSE and the NASDAQ alone and although I read the paper everyday and notice so many stocks come through the different columns such as the Big Picture, the Weekly Review, the IBD 100 and 200, the Stocks in the News. I was first confused on the methods I should use to reduce the number of stocks to research and also how long to watch them and what am I really looking for. So, I set out to answer these questions for myself and found a great strategy that answers all of these questions and while it still generates more, it gets me moving in the right direction.


How To Make Money Investing In The Stock Market For Beginners


I started doing some research on the web and came across a guy named Pradeep Bonde who runs a site named Stock Bee and he wrote an article a couple of years ago called How to Beat the Market for $1.25 a Week. In this article he lays out a simple strategy of creating your list of hot stocks to watch using the IBD 200.





Here is the basic strategy:

Get a copy of the Thursday for $3.00. You can tell that it's been a while since he wrote the article since a paper used to be $1.25. Personally, I have a subscription to the electronic edition of the Investor's Business Daily. If you don't have one click this link to get one and get a special offer. Get 4 Bonus Weeks when you subscribe to Investor’s Business Daily Digital Edition! The electronic version is easier to build your watch list from. If you like this post and buy it through that link, I'll make a small amount of money. 

Inside the Thursday's paper, you'll find a column called the IBD's Top 200 Composite Stocks.
Put these 200 stocks in a watch list. I personally put my watch list in my stock lists feature at investors.com.
  • Identify stocks that increased in price over 2% on minimum volume of at least 100,000 that's higher than the previous trading day. 
  • Buy the next day with 1% risk. 
  • Trail with a stop 
  • Enjoy your profits. 

I noticed that I had a lot of questions about this strategy and so did a number of people who read his approach so I thought I would break it down even further for myself. The easy part was getting the paper with the IBD 200. How to create your watch list, and where to keep them needed some expanding on so what I did was use the "My Stocks List" feature to create my watch list.





This is a really nice part of your subscription. The watch lists are nice. My only complaint with them is that you can't add more than 50 stocks to each list but that's ok.

Here's a detailed video that shows exactly where to find the IBD 200 and how to set up your watch list.


 


Once you've done that, the next thing you want to do is to populate your watch list with the 200 stocks in the IBD 200. If you use the electronic edition of the IBD, it's really easy to do. Here's a video that shows you how I did it.


 


Once you've done that, the next thing to do is find the stocks that meet the criteria in step 3. Here's how I did that.


 

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