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Use this investment strategy to increase the number of winning stocks you buy

by , 22 October 2015

Investing isn't easy. You need to research the stocks you want to buy and try to work out what lies ahead for the industry, plus a number of other aspects.

Regardless of how good your research is, you'll still invest in losing stocks.

So how can you limit the number of losing stocks you buy and increase your chances of backing a winner?

Read on to find out…

How to know when to invest in stocks

This investment strategy involves combining value investing with technical analysis. An unusual combination.

The first thing is looking for undervalued stocks. Once you have undervalued stocks that look worthy of investing in, you remove the ones that aren’t starting to trend upwards.

From the ones you have left, you apply this filter: Only buy a stock that was higher on the purchase day than it was eight weeks, or 40 trading days, ago, D R Barton in Money Morning US explains. A strategy that eliminates 70% of losing trades.

The merits of value investing and technical analysis combined

Value investing can lead you to find some great bargains on the stock market, but there’s always the risk that a stock will continue heading south.

By adding in this technical analysis filter, it removes a large number of potentially losing investments.

With the markets moving about so much at the moment, consider using a five to six week rule instead of the eight week rule above. In other words, once you have found your stock through value investing, only buy it if its price is higher than it was six weeks, or 25 to 30 trading days, ago.

This investment strategy works well for long-term investments. And ensures you don’t buy into a stock that’s heading downwards.

So there you have it. Use this investment strategy to increase the number of winning stocks you buy.

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Use this investment strategy to increase the number of winning stocks you buy
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