Stock Trading Strategies for the Win: How to Stay Afloat in 2024?

Stock trading strategies are your secret weapons that one can use to navigate the complex lanes of the financial market. A well-thought-out stock trading strategy lets the trader make informed and structured decisions that serve him in the present and lay the ground for a profitable future.

Before understanding the intricacies of stock trading strategies, we need to analyze the stock market sectors and the factors that can positively affect the market in 2024 and the forthcoming years. Elections and ongoing concerns about inflation, interest rates, debt levels, etc., must be considered before deciding on executable stock trading strategies.

Research the stock market sectors to invest in

According to expert analysts, the stock market will witness a considerable shift with a bumpy ride in the early months of the year. By the following year, investors can expect declining inflation, rapid economic growth, and noticeable interest rate cuts by the Federal Reserve.

One of the main factors propelling market expansion may be the Fed’s monetary policy.

Anthony Denier, CEO of the trading platform Webull, also believes the S&P 500 will have more diversity and depth.  He claims that most of the returns for the S&P 500 and the NASDAQ this year came from just seven companies. Known as the Magnificent Seven, the stocks that comprise approximately 30% of the S&P 500 include Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). According to Denier, we could see more movement in the remaining 493 companies next year.

How to invest in the election year 2024

The stock market has seen poor results in the past U.S. election years.

The S&P 500 has only gained an average of 7% during presidential election years since 1952, less than its average yearly total return of around 10% in a typical year.

Luckily, since 1952, when an incumbent president has been running for reelection, the S&P 500 has produced positive returns every year. It has gained 12.2% on average over those reelection years.

Since 1973, the best-performing S&P 500 sectors during presidential election years have been the financial services and energy sectors; the worst-performing sectors have been the information technology and materials sectors.

Is there a possibility of a recession in 2024?

The onset of the recession period was on investors’ minds throughout 2023, following two years of blistering inflation and increasing rate hikes by the Fed. Luckily, the recession never materialized, and the Federal Reserve witnessed a soft landing in the economy.  But investors are concerned that the US economy can still slip into recession.

Experts anticipate that although the US economy will slow down, a recession will not likely occur. In particular, they predict that growth will pick up steam in the second half of 2024, with a 25% chance of a severe recession, notwithstanding the possibility of a growth slowdown in the first half of the year.

How to start stock trading in 2024?

Taking up stock trading involves analysis, strategy, and continuous learning. One must have a solid foundation and understanding to understand the market’s ebb and flow. Consider the following steps before embarking on your stock trading journey:

• Understanding the essentials

Although the world of stock trading is large and intricate, starting with a firm grasp of the fundamentals is essential. Learn the jargon used in the stock market by understanding what stocks, bonds, stock option trading strategies, ETFs, and indices mean. Recognize the many sectors and industries, as well as how the market functions and what influences stock prices.

• Technical Analysis Mastery

Technical analysis is a powerful technique that predicts future market behavior by examining past price activity. 2024 will be a very volatile year for markets, therefore, it will be extremely important to learn how to read charts, comprehend trends, and become familiar with patterns and indicators like MACD (moving average convergence divergence) and moving averages.

• Fundamental Analysis Application

Technical analysis focuses on the “when” and “how” of stock trading, while fundamental research aims to provide the “why.” It entails assessing the profitability of a business, as well as other essential elements, including market position and managerial caliber, as well as the financial statements and condition of the balance sheet.

• Creating a trading plan

Your trading plan is your road map; it describes your investing objectives, level of risk tolerance, trading procedures, and standards. The details of what you will trade, when you will enter and exit transactions, and how you will maintain and check your portfolio should all be included.

• Choosing the right broker

Your broker is your entry point into the markets, so choosing wisely is essential. Choose a broker who offers abundant educational resources, is dependable, and is easy to use. Your broker ought to provide a platform where your needs are met- whether you are a technical trader or a beginner. 

Stock trading strategies to follow in 2024: Experts’ advice

Below mentioned are stock trading strategies suggested by experts no matter how the market will react:

• Do not time the market:

People indulge in making predictions about the stock market. But there’s no way to be certain about the market. That being said, many people believe that the key to investment success is timing the market, i.e., getting out of the market before a decline and returning before a stock rally. But this should not be the way. Instead of timing the market, one must focus on building a profitable portfolio that can withstand the ups and downs of the market. 

• Make your finances recession-proof:

Recessions are still possible in 2024, even though they are unlikely. Even experts can’t agree on whether the United States will experience a recession in 2024 because they are challenging to forecast. Being proactive and recession-proofing your finances is the wisest course of action. This entails reducing unnecessary spending, saving for emergencies, and paying off high-interest debt.

• Understand position sizing:

This technique determines your account size and risk tolerance to determine how much to put in each trade. It assists you in avoiding the traps of overtrading and under-trading and finding a balance between risk and return. Your position size can be determined using several techniques, including the Kelly criterion, the fixed dollar method, and the percentage method.

• Risk-reward ratio: 

The relationship between a trade’s possible profit and loss is known as the risk-reward ratio. It facilitates the assessment of a trade’s profitability and viability and the comparison of several trading opportunities. A healthy risk-reward ratio is typically more than 1:1, indicating that there is a greater chance of profit than loss.

Final Thoughts:

Predictions are made regarding the stock market now and then. However, being sure about the stock market shifts is impossible. Stock trading strategies help us be prepared for any circumstance that might affect the market. Continuous learning and improvement of your portfolio can prepare you for the ups and downs of the market.