For any trader making the best stock pick is the reason for his existence. This is after all how he hopes to make a fortune one day ' by picking that perfect stock that will rise a thousand percent in a short time and bring untold riches his way because he was wise enough to have bought it.
But how to find that perfect stock? Is there a way to know when a stock's price will start rising, or is it simply determined by fate?
A day trader doesn't really concern himself with issues like finding the perfect stock. To him it doesn't matter in which stocks he puts his money, as long as they comply with certain criteria in terms of short term profits. He has no interest whether the company will make a profit over the next year ' only whether the price will rise or fall between breakfast and lunch on a particular day.
Day traders use technical analysis to determine which stocks to buy. This involves the study of certain statistical indicators to try and predict future movements in the price of the stock. The moving average is one example of such a technical indicator and it is widely used by day traders.
Although long term traders sometimes also utilize indicators such as the moving average to reach a buying decision, they normally concentrate on what they call fundamental issues before deciding to buy a particular stock.
Apart from that they will study fundamental issues relating to the company. They would study the balance sheet to look at the company's historical profitability and try to make a future projection from this. If they think that the company is financially sound and likely to make a lot of profit in the future, they will buy its shares.
The thinking that underlies this behavior is the belief that a company's stock price will eventually be determined by its profitability. While short term movements in the stock price could be highly volatile and be influenced by things such as inflation, speculation and general economic conditions, the long term price will be related to profitability.
You would therefore often find traders who concentrate on finding companies that will be introducing revolutionary technology to the market. The expectation here is that such technology will be very popular, the company will make a lot of money and the stock price will sky-rocket. If this turns out to be the case, it will most likely be the best stock pick such a trader has made in a lifetime of trading.
Source: http://buithixuan.info/posts/financ...know-the-good-stocks-from-the-bad-stocks.html
But how to find that perfect stock? Is there a way to know when a stock's price will start rising, or is it simply determined by fate?
A day trader doesn't really concern himself with issues like finding the perfect stock. To him it doesn't matter in which stocks he puts his money, as long as they comply with certain criteria in terms of short term profits. He has no interest whether the company will make a profit over the next year ' only whether the price will rise or fall between breakfast and lunch on a particular day.
Day traders use technical analysis to determine which stocks to buy. This involves the study of certain statistical indicators to try and predict future movements in the price of the stock. The moving average is one example of such a technical indicator and it is widely used by day traders.
Although long term traders sometimes also utilize indicators such as the moving average to reach a buying decision, they normally concentrate on what they call fundamental issues before deciding to buy a particular stock.
Apart from that they will study fundamental issues relating to the company. They would study the balance sheet to look at the company's historical profitability and try to make a future projection from this. If they think that the company is financially sound and likely to make a lot of profit in the future, they will buy its shares.
The thinking that underlies this behavior is the belief that a company's stock price will eventually be determined by its profitability. While short term movements in the stock price could be highly volatile and be influenced by things such as inflation, speculation and general economic conditions, the long term price will be related to profitability.
You would therefore often find traders who concentrate on finding companies that will be introducing revolutionary technology to the market. The expectation here is that such technology will be very popular, the company will make a lot of money and the stock price will sky-rocket. If this turns out to be the case, it will most likely be the best stock pick such a trader has made in a lifetime of trading.
Source: http://buithixuan.info/posts/financ...know-the-good-stocks-from-the-bad-stocks.html