In the world of stocks there is much debate about what the best trading systems are. The very existence of multiple trading systems belies the idea that there is one “best” system. Instead of looking for the elusive “best”, let us simply examine some of the more popular methods that have consistently worked for many people over time.

The Elliot Wave system claims that the stock market always cycles through five phases. There are a period of accumulation, a small correction, a much bigger period of accumulation and rising prices, followed by another minor correction, and finally, the big wave, where the public catches on to the rising tide and begins buying en masse, followed by the mother of all corrections (A crash, to put it bluntly.)

The problem with this method is that while it is possible to find many periods in the stock market that in *hindsight* show a five phase wave, Elliot theorists seem no better than anyone else at predicting exactly which phase the market is in NOW and more importantly, the point in the future when the current phase will end.

Momentum Trading is based on attempting to pick out startups that will show unusual growth, on the order of 400% or more. It is true that in even the worst bear markets, the public will fall in love with a few new stocks each year. It is true that picking these stocks and investing in them is a wonderful investment strategy, if you can do it successfully.

It is also true that picking the right horse to win the race, or always picking the right time to bet on black for that matter, is an even better investment strategy. The trick is in pulling it off.

Value trading is a process of picking stocks that the investor believes to be currently undervalued by the market and snapping them up while they are still cheap, then selling them for a profit when the market inevitably realizes the error of its ways and the value of the shares grows.

Value investors base their assessment of which stocks are undervalued by comparing the price to hard, real world data on the company like profits, holdings, and dividends. In many ways, value trading is the most rational of trading strategies. This is also its greatest weakness, for time and time again it has been demonstrated that the market is far from rational in its valuations.

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