photo credit: ilamont.com

This trading tip can make a huge difference to your trading account.  It’s simple to implement, but it does take a few minutes of research.

Invest in the best performing sectors and short, or avoid, the worst performing sectors.

There have been countless investigations that prove this strategy beats most other options.  In fact, an Standard and Poors study from earlier this year revealed the validity of this claim after a 40 year investigation.  In essence, their findings showed that buying the prior year’s top performing sectors beat the S&P 500 index by a nifty 70%.  Compare that to only a 40% win rate for purchasing the bottom sectors.

Here’s how to implement this trading tip on a shorter time frame: scan a list of sectors on a monthly basis and rank them against the return of the S&P for the same period.

From the top 3 sectors that outperformed the S&P find those stocks that beat their sector.  Make a list of those strong stocks.  Wait for a pullback and then evaluate an entry point.  Calculate where to place a stop and then wait for the entry price to trigger.

By concentrating trades in the stocks from outperforming sectors there is a good chance it will become a profitable trade.

This is one trading tip that has some impressive, supporting statistics.