Buying stocks that touched 52 weeks high can be a thrilling trading strategy that many people would like to pursue. The high share price that comes after one year of the trading of these shares is usually a sign of a positive market trend. However, this approach also poses its risks as well. To achieve the highest return from the investments while averting high losses, it is necessary that the risk management techniques are put in place. Below are some key guidelines to help you as you find your way through the 52-week high investing climate.
Guidelines to invest in 52 week high share
Conduct Thorough Research
It is crucial to research the company background, its industry, and the macroeconomic environment before buying a 52-week high share. A stock’s High price and can thus can be misleading because it is not an indication of the real value of the stock. Through financial statements, earnings reports or growth forecasts, one must verify whether the firm’s performance corresponds to its existing price tag.
Use Stop-Loss Orders
The use of stop-loss orders should be institutionalized when trading in 52 week high stocks. These orders also allow the investor to sell the shares in case the price goes down below some agreed price in order to minimize losses. The practitioner should use a stop loss of 5-10% below the entry point depending in the risk tolerance as well as historical volatility of the stock.
Diversify Your Portfolio
Do not have all your resources in one place. To minimize on risks invest in different sectors and bases in different forms of assets. Although investing in stocks which have a high for the current week 52 might be a good idea the entire portfolio should not be invested in such stocks. Of course, one has to be careful not to overdo it to avoid getting locked-in to a particular sector during a downturn.
Monitor Technical Indicators
Employ ‘charting techniques’ to look for reversal/bulldozing formations. This is particularly in widely used indicators such as RSI, MACD and Bollinger Bands, which can reveal much about momentum and subsequent price action of a particular stock.
Stay Informed About Market Sentiment
Monitor the mood of the market to be aware of all the news that may influence your 52-week high investments. Volatility in the investor opinion or occurrence of any event can as fast hasten the reversal of the upward movement of the stock. Subscribing to service’s news feeds and constantly check the analysts’ reports for possible market triggering information.
Conclusion
Buying shares that have made a 52-week high should be considered as a good business investment provided that it is backed with good management of risks. Overall, if one has to follow these tips and stick to the plan, one can probably ride the market rises and at the same time, avoid a significant loss.
If you are interested in 52-week high investing then think of opening a dematerialized account with well-established online brokers such as 5paisa. 5paisa as one of the fastest-growing discount brokers of India provide the customer friendly interface along with low brokerage charges and powerful research tools besides other facilities. Both have user-friendly online demat account opening and their strong risk management aspect that cuts across new and experienced traders who are planning to engage in trading 52-week high.
