Trading Specific Stock Sectors

Using specific stock sectors for a trading strategy is a common characteristic among many traders and investors overall trading plan.

For long term investors, researching specific sectors and choosing a portfolio of various stocks will help you to diversify without holding positions that are related.

This is a major problem many investors, and traders make. They hold positions in stocks that are related and then when one goes down, they all go down.

Many times professional traders actually look for related stocks in the same sector that are not performing the same as each other.

This can lead to an opportunity for a short term trade to allow one stock to catch up to the other in regards to its longer term position as far as percentages are concerned.

Looking for those opportunities and the reasoning behind it can be a little complicated to understand. It would require a little more room to explain in detail than I have here on this page, but just be aware that it is generally not a good idea to hold too many positions in any one related industry at a time. (Unless of course, luck is in your corner and you wind up picking a sector that booms)


Here are some common stock sectors to look into for trading opportunities. This is only a partial list:

  • Drugs
  • Managed Care
  • Medical Equipment
  • Automotive
  • Transportation
  • Industrial
  • Advertising

One of the benefits of targeting specific sectors is that you can learn to become an expert in one area and learn what moves that sector.

This will give you an advantage in your trading as compared to having to know about 100's of stocks and every bit of news that comes out and how it will effect the many stocks you may be following.

Targeting 1 or 2 sectors will also enable you to know what stock charts to watch when looking for trading opportunities.

Take Oil for example. You can pay attention to stock charts and news on companies like Exxon Mobil and Chevron as well as watch current crude oil prices before entering and exiting trades.


This is only one example of a targeted trading strategy and it can be combined with other things you learn such as technical analysis to help make a complete trading plan.

I find that the longer I trade specific stock sectors, the more knowledgeable in that field I become and it makes it easier to know what and why those markets move the way they do, many times in advance.




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