The S&P 500

• Look at what the S&P 500 is doing. This is the main index for the stock market, and its behavior will tell you whether you should be buying or selling stocks. Begin by looking at the trend of the S&P on a daily chart. Add a 200-day moving average to it. You want to be a buyer of the market only if the index is trading above the 200-day moving average. When it is trading below the 200-day moving average, you want to either stand aside or be a short-seller (someone who makes money when stocks fall).
  
  

Determine the Trend

• Go to the weekly chart on the S&P and draw a trend line. You will draw a trend line by connecting the lowest lows of the last three months and the highest highs of the last three months. This will create a channel. If it is sloping upward then the trend is up; if the angle is sloping downward then the market is in a down trend. Ideally you should buy stocks only when the market is above the 200-day moving average and is trending up.
  
  

Fundamental Analysis

• Fundamental analysis looks at the value of a stock by examining its balance sheet for things such as quarterly earnings, profit-to-equity ratio, debt-to-equity ratio, and overall growth. A couple of good books on fundamental analysis include "How to Make Money in Stocks" by William O'Neil, and "The Intelligent Investor" by Benjamin Graham, who mentored a small-time investor named Warren Buffett.
  
  In addition you should visit MoneyCentral, Investors.com and Investopedia.com. The first two greatly simplify fundamental analysis by offering tools that will rate your stock from 1 to 10 or A to E to determine how strong it is.
  
  

Technical Analysis

• Technical analysis uses price-based indicators, along with chart patterns, to predict where the markets will go. Technical analysis gives you clues as to when the markets will move; fundamental analysis tells you why it is moving. There are literally hundreds of indicators that you can look at, along with dozens of chart patterns that you can use.
  
  However, one major problem with almost all indicators is that they are lagging. They tell you where the market has been, but they don't necessarily tell you where it is going. This is why it is so important to look at the overall trend of the market, and to always trend with the trend rather than against it.
  
  

Combine the Methods

• Combine both of these methods of looking at the market, along with the trend of the S&P, to get a whole picture of the stock market. Weeding out what works for you and what doesn't can take years. Good places to start learning are MoneyCentral and TrendTrading (see Resources section) and Investopedia.
  
  

Money Management

• This is one of the most important but often overlooked parts of investing. You should risk only about 2 percent to 3 percent per trade, and you should have only about 4 percent to 6 percent exposure at any one time. In other words, if you are using $10,000 to invest with, you should risk only $200 to $300 on one trade, and you should only have a $400 to $600 exposure to the market at any given time. Once your position in a stock has moved somewhat in your favor, you can move your stop-loss (a stop-loss is an order placed with your broker to close out a trade if it moves too far against you) up so that you are at break-even. Then you can put on another trade.