Every investor wants to try and find an edge or an angle into the market that will deliver potential profits, and the strategy known as high velocity profits is designed to try and help you to stay ahead of the curve, even when the markets are proving volatile.
Profits are never guaranteed when you are speculating your cash on targeted stocks and specific markets, but it makes sense to try and continue your investment education as you go along, which is why it might be worth finding out about this type of approach.
What is the thinking behind the high velocity mantra?
The basic principle behind this buy and hold investment approach is that you are highly selective with the criteria for picking stocks that you want to invest in, but the fundamental trigger is to only buy stocks that are on the rise and trending to continue that upward trajectory.
There are other specific rules attached that have to be followed rather than just buying stocks that are rising, and the key is to hone in on stocks that still offer plenty of value, despite the fact that they are already trending upward.
The high velocity approach is a method that aims to identify a stock that is going into that range at the point where you are looking to invest, and you use the same disciplined approach to identify the moment when the stock’s run has come to an end and might even be about to fall back.
This is the normally the signal to sell and take your profit if you have got the strategy right.
Suitable for the less active investor
The high velocity strategy is centred around using charting techniques and this is not normally a fast cash scenario, as you may end up holding on to the stock for anything up to 18 months, on average, giving the chosen stock ample opportunity to deliver the potential gains that the charts were promising in the first place.
The fact that you can sit back and enjoy the ride once you have chosen the right stock to invest in, will appeal to some investors who don’t want to spend all their time monitoring and checking prices on a frequent basis.
Any money market investments that you make are always going to carry an element of risk, as there is no gain without a bit of pain at times, and some stocks won’t rise as expected, or could even fall, but if you can find a system that picks more winners than losers, this should see you make healthy return over a reasonable period of time.
Find a pattern that points to possible profits
The man credited with spotting the trends behind the high velocity system is Keith Fitzgerald and he has been actively involved in the markets for more than 30 years.
If you have been around that long it demonstrates that you have a good understanding of how the various financial instruments available work and it should give you the confidence to search out angles that others haven’t yet recognized.
As you might imagine, when Keith first identified what he thought was a definite pattern that could be exploited, he had enough experience to know that a thorough investigation of the possibilities would be required to test the system over a period of time, before going ahead with any actual investments.
His team spent a considerable amount of time testing the system and seeing how the trend-spotting strategy would hold up in different scenarios, such as when the markets were on a bull run and when market sentiment was much more negative.
Doing this sort of extensive research and testing your theories is a great way of seeing whether you have spotted a bit of anomaly that doesn’t hold true at certain times or if you have found a system that seems to perform well regardless of whether the markets are in bear or bull territory.
Taking advantage of forwarding momentum
If something is described as high velocity it means that it is something that has momentum and is picking up speed.
Keep that description in mind and you can see why it would be exciting to an investor to spot a stock that has started rolling forward and could be picking up speed at a rate of knots.
So many stocks behave with momentum, falling or rising according to how the market is viewing that company and their future prospects. The key to trying to generate a profit through a system such as high velocity profits is to use the charting technology available and apply the formula created to climb aboard a stock that is going places, in the right direction.
Identifying the fundamentals
You might decide that it would be easier to become a subscriber to the high velocity service rather than spending a lot of time pinpointing stocks that meet the investment criteria.
If you are trying to get an idea for yourself about what sort of things you need to look out for in order to create a potential investment shortlist, one of the main criteria to focus on is the company’s fundamentals.
What you are looking for is that a high number of a company’s fundamentals are trending higher than previous numbers when their financial records become public record.
If they are demonstrating a rise in operating cash flow, sales figures are growing, they have a larger amount of working capital, and its ratio of long-term debt to assets has fallen, these are just some of the positive signs that the company’s fundamentals are in rude health.
There are about nine financial indicators that you need to look at and if the majority of them are all showing positive momentum, this is is one of the factors that will be used to identify a stock that might be worthy of investment.
If you like the idea of high velocity profits it is worth finding out a bit more and looking at the background information to see if it is a strategy that could suit your risk profile as an investor.
You can’t expect to make money every time when investing in stocks and you might even lose some cash on some picks, but this is a strategy that has people talking.