Trading Growth Stocks For Big Profits

Many of the best performing stocks in history have been growth stocks

. Taser International went up in price over 2200% in about 10 months. Qualcomm increased about 2100% in 11 months. Yahoo went up over 6700% in 2 1/2 years. You have to know what to look for. You must trade them properly. You need to implement successfully proven, buying and selling rules. Doing all of that, you certainly could make a fortune trading growth stocks.

A growth stock is defined, as a stock of a company which is growing earnings and sales, faster than its industry or the overall market. Earnings are the number one factor when it comes to a stock's price advancement. Most of the time, there is no legitimate reason for a stock to rise in price, unless it has decent earnings. The best performing growth stocks usually have exceptional earnings and sales.

The key to making big profits trading growth stocks, is having a trading plan that gives you an edge, or in other words, puts the odds in your favor. It is vitally important to put as many factors in your favor as possible before taking a position in the stock market.

The first factor I consider is the general market direction. The stock market needs to be in a confirmed uptrend. This is because about 75% of all stocks follow the general market trend. Growth stocks can correct double as much as other stocks during a downtrend. They also tend to make the biggest price advances when conditions are right. Knowing this, it is a must to properly analyze the trend of the stock market.

I look for fundamentally strong stocks, with excellent earnings and sales numbers. I search for younger, innovative companies with new exciting products and/or services. This tends to keep the company's fundamentals strong for a long time. Great earnings are a must for growth stocks to do really well.

Technically, I want a stock to have built a sound base, or chart pattern. This includes a cup-shaped base, a double bottom, or my favorite, a flat base pattern. There are a few other historically proven patterns I watch for as well. The stock should be near or at, a 52-week high in price. Better yet, approaching or at, a new all-time high in price. At this point, I am looking for the stock to break through a key resistance area on heavy volume. This tells me big institutions are supporting the price advancement.

There are other fundamental and technical factors I consider before trading a growth stock, but this should give you a good idea of how it is properly done. As always, money management is critically important. You must keep all losses small. Implementing proper selling rules are also an important factor in your overall trading results. When traded properly, growth stocks offer tremendous profit potential.

Trading Growth Stocks For Big Profits

By: Gary E Kerkow

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