How to Recognize the Right Opportunity to Trade Stocks
Are There Secrets to Recognizing the Right Opportunity for Stock Trading?
Truth be known, there are no real secrets to investing success. Whether in the market for the long haul, or investing as a day trader there are numerous tips and rules of thumb that will help you determine the right time to buy and sell.
Supply and demand are driving forces that influence stock values. The determination of any commodity from a used car to a share of stock is what the item is worth as opposed to what a willing buyer would pay for it. It stock is priced higher than what investors in that market segment are willing to pay you should certainly avoid such a purchase. When a stock appears to be undervalued you should be prepared to take advantage of that opportunity.
But when to invest is a long-debated question. The simple answer is: regularly. If you don’t invest you can’t lose money. Nor can you turn a profit. It’s almost guaranteed that your investments will consist of wins and losses but with rational decisions and careful market analysis your choices can provide earnings on both short and long-term trades.
What You Should Know and Do
Evaluate your finances before executing buy orders. If a stock price looks like a bargain but exceeds your reasonable means you should pass regardless of the bargain. Remember that all investments are at risk. Don’t put your financial future on the line for a purchase that may cause long-term damage to your capital. The US Securities and Exchange Commission publishes guidelines for making investment decisions, as well. Among their recommendations are such evaluations of your financial situation and your comfort level with risk.
Do your homework. Companies report earnings and anticipated results that impact stock prices and either indicate to you that they are spending wisely and investing in growth (buy) or having lower-than-expected revenues (hold or sell). You want to find out the why behind the lower revenues – it may be that the primary product has lost credibility in the marketplace, or simply that there is a new jaw-dropping product about to be released that consumers are waiting for. You need that level of detail to make an informed decision on your investment strategy.
This brings us to another topic – analysis tools. Many sites are available to even beginning investors that track investment and business news, and provide real-time stock ticker displays. There are also many software tools with sophisticated modeling of stock trends and performance that can be examined for tracking history and generating “what if” scenarios that help you make investment decisions. Investopedia is one such site that provides discussion points for consideration of the analytical software that may be of use to an individual investor. Some of these tools lend themselves to a particular market segment (such as metals or healthcare) so consider what your intentions are before selecting any particular method.
Buy low – sell high. That’s pretty obvious, but it can be difficult to discipline yourself in some cases. If you buy a stock low and it drops even lower you may start to question your logic on the initial purchase. Did you make the wrong evaluation or perhaps miss some news or financial information that everyone else knows about? Or maybe the stock is becoming an even better bargain and you should continue buying to reap even higher profits. That can be a troublesome judgement call that requires discipline and confidence to make. Here again your experience and track record help you to make such decisions.
Day traders typically seek out technical analysis tools and charting that indicate easily what is taking place on a particular stock and make quick decisions based on that level of information. Depending on the type of trading a particular day trader engages in they may monitor the stock for only minutes, a few hours, or even days to turn the stock around quickly for a profit.
While pursuing your individual investment strategy, keep in mind the fact that rules may not be consistent across all market segments. Some markets may be more influenced by supply and demand while others could be seasonal in nature and still others more susceptible to overall market fluctuations. Manufacturing stocks may have indicators quite different from oil or technology stocks, for example.
Remember that for every buy order you place someone else is selling. That means all your analysis and review of the stock’s value that tells you the time is right to buy is contrary to the analysis and opinion of the seller. Who is right? Only time reveals that to the investor. It’s important to track your successes and failures to learn from them which decisions were on track and which lacked the results you had hoped for. This is how you strengthen your expertise and hone your investment strategy. You will also be able to determine which charting or analysis sites and software tools drive you toward those successes.
Money.CNN.com provides some insight as to what the impact of worst case investment scenarios might present to traders. These analyses present such conditions as investing at the peak of the 2008 financial downturn, which would result in taking 5.5 years to climb back from your losses. Granted these cases are extremes, but they certainly provide food for thought.
Select an Online Broker that Provides the Tools and Technology You Need
Arming yourself with information and comprehensive analytical tools is critical to determining the best opportunities for your trades. Select an online broker that provides the tools that enable your investment decisions, execution options, support, and reliability that can make you a successful investor. These tools may include simple stock tickers, financial news feeds, and sophisticated stock analysis and modeling. SureTrader is a leading online broker for day trading that can provide you with advanced technical capabilities and support for your trades, including complete mobile options for traders using both iOS and Android devices.
Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.