How am I supposed to know which stocks to choose?
If you want to hold a stock for the short term, look for stocks in an uptrend showing increasing volume. To find out if a stock is an uptrend, wait a while to see where it’s going. If the price is going up with increasing volume, that’s a good indication.
For long-term investors, it’s good to look at the company’s fundamentals. Here are some positive signs:
- Compare Year to Year Quarterly Earnings & look for the following:
- Increasing Revenue, Profit, Equity and/or Assets
- Decreasing Debt
- Low Debt to Assets Ratio
- Positive and/or Increasing EPS (Earnings Per Share) Value
Low #of Outstanding shares: Outstanding shares represents the number of shares held by public investors & insiders. If the # of these shares are decreasing, that means the company is buying & holding because it believes the stock price will soon rise. Always keep in mind, these are just positive signs that are likely to succeed and there’s never a guarantee. Stocks are risky; some work in your favor while others don’t.
Ignoring Good Signs: Don't Get Left By The Train!
Some investors make the mistake of not getting into good stocks when they’re about to take off because they feel that the stock won’t move as high or they’re just plain skeptical. Some have often kicked themselves when they missed good deals.
For example, on December 2008 to June 2009, CTIC rose progressively from $0.01 to $2.10 for a gain of 21,000%. Yep, you missed it.
Here’s another one: In just six days from July 31st 2009 to August 5th 2009, NWMT went from $0.01 to $0.61-A gain of 6,100%. I’m guessing you missed that too.
Ahhhh! My Stocks are falling!
As a stock trader, this will be bound to happen to you. You have two options: stay & ride the whale or jump ship.
Option 1: Holding-Riding the roller coaster all the way down
Some investors hold on to the stock because they believe the stock will do a rebound. If the company has good fundamentals, then there’s a good chance that the price will go back up one day but there’s a possibility it might not.
Option 2: Jump Ship!
Sometimes, the stock price keeps falling below ground zero with no hopes of any return. Other times, it may take years or even decades for it to get back to where it was. In these cases, it might be a good idea to leave the stock for now and put your money somewhere else. Fortunately, stop loss orders are available to protect one from losing everything.
Choosing your investments in the right way is too difficult and these method that you wrote are good points to follow. Choosing wisely on investments is same with choosing whom to trust in you child health care or even the right doctor to consult with.
Posted by: Medical Advice | Jan 19, 2010 at 11:00 AM