If you are new to the stock market, you should choose to use trading strategies over the shooting in the barrel method. Strategies have been proven to outperform barrel shoot significantly. There are several basic strategies to start with that will help you determine how to protect your investments by advising what stocks to buy and when to sell. Once you have mastered the basics, you can learn more about the hundreds of advanced strategies.

Protecting your investment by reducing the risk that comes with holding a certain stock is known as hedging. A put option makes it possible to sell the stock for a set price during a predetermined period of time. This will offset some risk that comes if the stock decreases in price. The put option value is increased if the price of the stock happens to fall.

The most expensive hedging strategy is buying put options against individual stocks. A better option may be to buy a put option on the stock market itself, especially if you have a broad portfolio. This makes general market declines less of a danger to you. Selling financial futures such as the S&P 500 futures is also a good way to hedge against market declines.

This strategy was used by many during the 1990s bull market. The strategy works by choosing the ten stocks out of the 30 in the Dow Jones Industrial Average that have the highest dividend yields and lowest price-to-earnings ratio. All the companies on the Dow Index have long histories of reliable performance, so the ten lowest components would therefore have the greatest growth potential in the short-term. The new Pigs of the Dow strategy is an offshoot of the Dogs of the Dow. The Pigs strategy works by selecting the five Dow stocks with the worst performance over the past year. The idea is that the Pigs will rebound and perform better than the rest of the Dow components.

When you buy stocks on margin, you are borrowing money to pay for your investment. If the margin is 100%, you can buy twice as many shares as you would have if you did not buy on margin. Usually, this loan comes from your broker. The upside to buying on margin is that your money goes further. The downside is that if the stock goes down, you will still have to pay back the loan. Therefore, you should limit your margin buying and place stop-loss orders to put a floor on your losses if the market should go against you.

An investor must choose a fixed dollar amount to invest regularly to successfully complete dollar cost averaging. For example, the buyer may invest in mutual fund shares every month. If that fund plummets in price through the market, that investor will be given more shares for his monetary expenditure. So, as the prices rises, the fixed amount price will allow the purchase of fewer shares.