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What is Fundamental Analysis

One of the tools that investors use to manage their portfolios is fundamental analysis. It is helpful in gathering the right information to make informed investing decisions. Successful fundamental analysis can build a path to meet your goals by allowing traders to separate companies that are fundamentally strong from those that are fundamentally weak. Fundamental analysis is different than technical analysis, which focuses more on price moves and technical features of a particular stock's historical performance.

What is Fundamental Analysis?

Fundamental analysis refers to a method of analyzing and evaluating equities, though it may also apply to other types of securities. With fundamental analysis, income statements, balance sheets, cash flow and other publicly available documents are used to analyze the financial health of a company. Economic data such as unemployment numbers and interest rates may also be considered. The goal with fundamental analysis is to find companies that are trading at a discount from their true (or “intrinsic”) value and thus may increase in share price when the market recognizes their quality.

Learn about fundamental analysis.

The Basics of Fundamental Analysis

Many investors believe that fundamental analysis is an important component of almost any trading or investing strategy.

These are some factors to consider when conducting fundamental analysis:

  1. What is the company’s revenue?
  2. Is it growing?
  3. Are they making a profit?
  4. Are they increasing indebtedness or paying off debt?
  5. What are their turnover rates?
  6. Does management take care of employees?

All of this helps define a numerical intrinsic value for the security that can be compared with its current price so as to determine whether or not it is overvalued or undervalued.

What is the Difference Between Fundamental Analysis and Technical Analysis?

Fundamental Analysis is often (mistakenly) directly contrasted with Technical Analysis.

Many technical analysts say there is no need to mine corporate and economic data to determine a company’s value, because everything they need to know is already reflected in the price. Instead, they use a variety of methods to predict where price will go in the future. They may look at price volatility as measured by the strength and duration of a movement away from a previous level. They might apply a formula such as MACD, Bollinger Bands, or simply analysis of the moving average price over time. Online Trading Academy’s patented Core Strategy is a type of technical analysis that teaches how to identify supply and demand levels and then predict turning points in the direction of a security or the market as a whole.

Another common misconception is that fundamental and technical analysis are in competition and an investor must make a choice between them. In fact, when used properly, both can be useful tools for the investor.

How to Use Fundamental Analysis for Trading Stocks

Watch this video to see how smart traders use fundamental analysis when looking at stocks.

Fundamental data: Beta

Price to Earnings in Fundamental Analysis

This measure is a very popular method of fundamental analysis. It consists of finding a company whose price-earnings (P/E) ratio is low compared to others of its kind. To find the price-earnings ratio, divide the stock's current price by its earnings per share.

Fundamental analysis formula

If a stock is selling for $35 now and its earnings last year were $7 a share, the P/E ratio would be 5 (35/7=5). That means for every $1 the stock earns, investors are currently willing to pay $5. However, investors also pay for future earnings. If the same $35 stock is expected to earn $9 a share next year, then the P/E ratio would be 3.89 ($35/$9 = 3.89). The idea is to find stocks with a significantly lower P/E ratio than others in its category. That category could be almost anything, from an industry group (i.e.; financial stocks) to high-yield securities, or many others.

A refinement of P/E is the PEG ratio. PEG refers to P/E divided by growth rate; if a stock is priced at $80 and has earnings of $5, then it has a 16 P/E ratio. If that stock has a 20% annual growth rate then its PEG is 0.8. The higher the growth rate the lower the PEG will be, so a stock with a very low PEG has potentially attractive fundamentals.

The following video shows the difference between PE vs PEG:

PE vs PEG

In the following Screens, ABC's P/E Ratio is 43.60 whereas XYZ's P/E Ratio is much lower.

ABC

Fundamental Analysis Chart

XYZ

Example Fundamental analysis

The P/E model is not applicable in all cases. If the company has losses or breaks even, then there are no earnings to compute. Also, companies in a cyclical industry, or which have a small capitalization, are likely to be less stable which cause their values to fluctuate too much from day to day, week to week or month to month, for P/E values to be a reliable measure. Highly volatile equities, such as companies focused on new technologies, are a breed apart. Many lose money, so it is impossible to compute a P/E ratio. Yet popular expectations are so high that their prices may be well above profitable companies.

Earnings Per Share in Fundamental Analysis

Earnings per Share (EPS) is calculated by dividing net income by the weighted average common shares outstanding. It is used in fundamental analysis for valuation purposes. This calculation works well when looking at the past, but if an analyst wants to look at the future, they need to calculate EPS based on the expected outstanding shares in the future.

At times financial statements will present two types of EPS calculations.: one for primary earnings and the other for fully diluted earnings. Fully diluted EPS includes all common-stock equivalents, such as warrants and options, and assumes full exercise and conversion. This calculation provides the maximum dilution. When comparing EPS between companies and within sectors, be sure to use the same EPS calculation, otherwise you will be making comparisons between apples and oranges. The same is true when calculating the Price/Earnings Ratio (P/E). The P/E includes an EPS number in its calculation. The P/E is one of the most widely used valuation tools for the price of a stock. Therefore, when doing your own analysis, make sure you are using the same EPS numbers for each company in your P/E calculations.

Cashflow in Fundamental Analysis

Cashflow is an important measure of a business for investors because it is a way of determining a company's ability to pay dividends and more. Generally, cashflow is defined as the net income (the difference between how much the company sold and how much it spent during a particular time frame, typically one quarter) of a business, plus depreciation (an accounting method which spreads out the cost of a fixed asset over several years) plus the value of other non-cash assets such as intangible assets, including copyright patents, trademarks, licenses, goodwill and franchises.

Companies, like people, need cash to keep going. Corporations need money to pay dividends, of course. But they also need it to pay for all the goods and services they use, as well as making capital improvements (things you can touch or feel, like buildings, machinery and computers), and paying operating costs (wages, raw materials, gas for company cars, and electricity).

Companies with a high level of debt have to pay a significant amount in interest to service that debt. If an opportunity suddenly appears, perhaps to buy a strategically located piece of land or a company that would help the company in some way, cash-poor companies may not have the money to make the deal. Most important, perhaps, is that during “hard times”, companies with a cash cushion are more likely to survive. Companies which have cash to make it through the down periods are in a good position to make clear-headed judgments, keep their enterprise afloat and emerge in a stronger competitive position.

One proponent of Cashflow Analysis is Robert L. Renck, Jr., managing director of R.L. Renck & Co., who uses a surplus cashflow analysis. That approach adds together pretax income (how much money the company takes in before it starts paying taxes) and depreciation. Then it subtracts capital expenditures, which is the money companies spend to buy or improve capital assets, which again are those things you can lay your hands on such as computers, machinery or buildings.

Kenneth Hackel, founder of Systematic Financial Management, New Jersey, scours stocks for companies that can pay off their entire debt entirely from free cashflow. That figure is arrived at by taking, for the current year, the amount of cash left over after taxes, then adding the sum of all the fixed assets - the company's property used in running the business but which won't be sold off, such as furniture, machinery, computers - which have depreciated for that year, plus other non-cash expenses such as amortization and depreciation. Then subtract all capital expenditures and any increase in working capital, which is the money left over, by subtracting the liabilities from the assets.

As you begin to develop a picture of what you want in a stock, information obtained from technical and fundamental analysis could be used as benchmarks to measure the worth of potential investments. Since the most popular fundamental analysis focus on specific company's earnings, growth and value in the market, consider the market evaluation of the entire sector and overall market conditions rather than just that of the individual stock. Performance of one company is generally greatly influenced by the sector and overall market conditions.


This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions.

The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Past results are not a guaranty of future performance.

Ref: https://www.tradingacademy.com/financial-education-center/fundamental-analysis.aspx

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UNDERSTANDING THE STOCK MARKET - THE BASIC RULES EVERY TRADER SHOULD KNOW

The stock market is where many new students at Online Trading Academy are most comfortable when they arrive. They have traded stocks previously, either as individual shares or as components of a mutual fund purchased by their 401(k). They understand the concept of owning a piece of a company, and betting on how well that company is going to do in the near term. These stock market basics are very comfortable to them.

However, your familiarity with companies listed on the stock exchanges can actually be a disadvantage. It’s tempting and can even feel patriotic to buy a company’s stock because you like its products or its management, or because their headquarters are in your hometown. Stock market basics tell us that we should look for a strong company, with good management, in a growth industry—these are called “fundamentals”. The problem with the fundamental approach is that by the time a company flashes positive signals for all these qualities, its price has already increased to reflect a positive view from the market. Its further upside potential may be limited making it actually riskier rather than a “blue chip” stock to invest in.

The 4 Basic Rules of the Stock Market

Graphic with text: Focus on price, Stay liquid, Practice before you jump in, Don't try to out-think the markets

Stock Market Basics Rule #1: Focus on Price

Educated traders follow a very different set of criteria. These traders focus on a single consideration: price. It may be a poorly run company but, if conditions call for a brief improvement in its price, it’s a good buy for the trader who knows when to get in and when to jump out for a quick profit. Conversely, a great company will sometimes climb out of its comfort zone to a price where suddenly there are more willing sellers than buyers. This means price is about to plummet, and it’s the informed short seller who could reap the benefits.

Stock Market Basics Rule #2: Stay Liquid

There are two main components to this rule. First, the stock has to be actively traded — at least 100,000 shares in daily volume. If trading stocks below that level, you run the risk of being stuck in a position simply because there are no traders on the other side. Second, you should stick to tickers with a price below $50 simply because the liquidity requirements above that level become distracting for most traders.

Stock Market Basics Rule #3: Practice Before You Jump In

This is arguably the most important stock market basics rule. Rather than investing in the broad market you could consider following a few tickers and getting to know their trading range very well. Remember, this is a stock market basics approach that focuses on price. Once you know where it “should” trade then you’ll be well positioned to be able to identify a departure from the norm and act quickly for a potentially positive result. This is the opposite of “buy and hold” because you may load up on a stock in the morning, dump it in the afternoon or a day or two later, then buy it again when conditions change. It’s an agnostic approach to the markets in which the most important consideration is your own desire to be successful.

Stock Market Basics Rule #4: Don't Try to Out-Think The Markets

Here’s a scenario you’ve probably witnessed: a company in a sector has a bad quarter, or maybe a product recall, and all stocks in that sector decline even though the other companies have done nothing wrong. It’s illogical but that’s how the market works. Similarly, mediocre companies will go up in price when the market is hot because “a rising tide lifts all boats”.

When you’re focused solely on price — the basis of the step-by-step trading strategy taught at Online Trading Academy — you don’t need the markets to be logical. You simply want to identify the zones where supply and demand are likely to be out of balance, then buy or sell when price enters these zones. Experience tells us there are large quantities of unfilled buy or sell orders at these price levels and, once the orders are filled, price will change direction regardless of what else is happening in the economy or the market.

The Basics of Stock Types and Investment Strategy

Most people have two types of buckets of money in their lives. The first bucket is our income (short-term). It is what we live off, take vacations on and run the household with. The other bucket is generally bigger and contains our wealth (long-term).

To fill our long-term bucket we need a plan. We need to ask ourselves a series of questions and be quite specific about the answers.

  1. Why do I want to invest? What are my specific tangible goals?
  2. How old am I?
  3. How much capital do I have to work with?
  4. What are my strengths and my weaknesses?
  5. How will I manage my risk?

Once we have the answers to these questions written down, then we can start to talk about the style of investing that's right for your goals.

Types of Stocks

There are two types of stocks: Common stock and Preferred stock. Briefly, common stock gives the stockholder voting rights, may or may not pay dividends and, if the company were to go bankrupt, would be paid after the bank and preferred stock holders. In contrast, preferred stockholders have no voting rights, own a fixed group of shares, earn higher dividends and are paid before the common stockholders if the company were to go bankrupt. Learn more about Stock Types.

Investing Strategies

There are two traditional styles of investment: Growth investing and Value investing.

What is Growth Investing?

Growth investing is taking advantage of new technological advances or medical breakthroughs with strong companies. Basically, investing in stocks that have a lot of room for growth. This type of investment will often have high profit to earnings or P/E ratio. This is the style of investing Peter Lynch became famous for.

What is Value Investing?

In value investing, you look for companies that have been beaten down, but still hold valuable assets that can be turned around into a profitable company later. Sir John Templeton, who was the master at Value investing, became a billionaire using this investing style.

What is Strategic Investing?

We’ve covered the traditional styles of investing, but today there is another option that could give investors more flexibility and additional techniques to manage risk. It’s an investing style we teach at Online Trading Academy called Strategic Investing.

Strategic Investing is a combination of growth and value investing, that also uses tools like options to reduce the cost of purchase, have the potential to create revenue while you’re waiting and give you an escape route should the stock not move as you expected.



This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions.

The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Past results are not a guaranty of future performance.

Ref: https://www.tradingacademy.com/financial-education-center/stock-market-basics.aspx

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HOW DOES THE STOCK MARKET WORK?

There are many different strategies for investing, but the basic function of the stock market comes down to investors purchasing and selling previously existing shares on the New York Stock Exchange (NYSE), Nasdaq, or other stock exchanges.

Let’s take a closer look at how the stock market works, and how you can make it work to your advantage as a trader or investor.

Man drawing a blue line on a chart

History of Trade On The Stock Market

Before we dive into how the stock market works, let's talk about how and why the stock market came into being in the first place.

The Merchants of Venice were credited with trading government securities as early as the 13th century, but the first genuine stock trading markets didn’t arrive until the 1500s.

As is usually the case, necessity was the mother of invention in the formation of the stock market. The East India Company, who holds the distinction of being the first publicly traded company, allowed for investors to invest in multiple ships. So, instead of financing one ship and risking total loss due to pirates, disease and storms, they allowed investors to purchase shares in multiple ships so if one was lost, all was not lost. Their success led to similar charters being granted to other businesses in England, France, Belgium and the Netherlands. Coffee shops were their trading floor, where stocks were handwritten on sheets of paper and traded.

Antwerp was the commercial center of Belgium, and it is generally accepted that they had the world’s first stock market system. Eventually, the first U.S. stock exchange was opened in 1791 in Philadelphia.

How Do Stocks Work?

Understanding how stocks works is fairly simple. Companies sell shares of their company to investors, who then sell those shares back to other investors. Owning shares in a company makes the investors part owners of the company. If investors sell shares at higher prices than they bought them, the value is said to go up, and if they sell for less than they paid, the value is said to go down.

Initial Public Offerings

When a company wants to raise money for expansion, it goes public by making an initial public offering (IPO) of common stock. What this means is that they are offering shares of their company’s stock (ownership in the company) to investors.

This is a familiar process if you’ve followed the high-profile IPOs of Facebook (ticker: FB), Twitter (ticker: TWTR) and other tech companies. Typically, the amount of the company that is sold is only a fraction of its total ownership, so the price set for the stock (as determined by open bidding once it goes public) determines the value of the entire company by extension.

Working with an underwriter (a Wall Street bank), the firm tries to guess an appropriate valuation (since that’s what actually goes into the pockets of its executives and private investors) but their valuation is usually off the mark in one direction or the other, sometimes by quite a bit. For example, the day it opened TWTR quickly doubled from its offering price.

How Does the Stock Market Work?

For the stock market to work there must be buyers and sellers. These buyers and sellers trade existing, previously issued shares which are offered by one investor and bought by another. The fact that they are previously existing shares means that most trading on the stock market has no direct impact on the company being traded. The buyer can place a market order to purchase at the current price, or a limit order to purchase if the stock reaches a certain price (which can be lower or higher, depending on the trading strategy). That order is matched up with a seller who has put shares up for sale.

The picture Wall Street likes to paint of an opening bell followed by frantic trading in a huge room full of buyers and sellers is pretty much a historical fiction. Stock trading today is done electronically and the prevailing sound is silence, other than the fans that cool the huge supercomputers used by the exchanges and institutional traders. This is good news for the savvy trader and investor because it means a more efficient and predictable marketplace with much less left to chance and randomness.

What Are the Different Types of Stocks?

Basically, there are two types of stock issue. There are Common stock shares and Preferred stock shares.

Common Stock Shares

Common stock shares are, well, the most common when referring to buying and selling stocks. The ownership of a share represents a claim on the profits of the company and offers the owner voting rights to aid in the direction of the company’s management. Common stock was created to offer gains through capital growth.

Preferred Stocks

Preferred stock functions much like a corporate bond and generally do not offer any voting rights. However, preferred stock typically offers stable dividends, unlike common stock where the dividend can be variable, withdrawn or not even offered. Another protection that is offered to preferred stock owners is they are paid before common stockholders in the case of the company’s liquidation.

Custom Stock Classes

Preferred and Common stock are the two major styles of stock. However, it is also possible for companies to customize different classes of stock to fit the needs of their investors. One of the reasons for creating share classes is so the company can keep voting power concentrated within a certain group of owners. These different classes are often designated in their trading symbols by adding the letter A or B at the end of the symbol.

Warrant Stocks

Additionally, some stocks are sold and placed under Warrant. A warrant typically is placed on the insiders or initial investors that own more than 10% of the company’s shares. The warrant typically states that the shares cannot be sold for 3 to 5 years. Other kinds of warrants allow the insiders to purchase more stock after a given length of time.

To sum it all up, most stocks are issued as common. Common stock can receive variable dividends and have voting rights. Preferred stock typically costs more to buy, but has a dividend fixed in perpetuity with higher creditor rights than the common share owner. Both face the risk of company failure.

What Determines Stock Price?

stock chart with a blue up and down arrow

Once the initial public offering is completed, the stock price can move independently of the actual company’s success; a current example is the sky-high stock price for Tesla (ticker: TSLA), a company that may be years from profitability.

So, what makes stock prices go up or down? The simple answer is, supply and demand. Price changes reflect supply and demand, so when a stock is deemed desirable due to recent success of the company, a strong industry sector, or just plain faddishness and popularity — then its price goes up. If investors are unwilling to buy a stock due to the company faltering, a weak industry sector or the price being simply too high, that lack of demand will cause price to drop. At some point price will move low enough that investors are again willing to buy and the cycle will start all over again. Value investors, like Warren Buffett, specialize in finding unpopular stocks in forgotten industries that still have strong earnings and a solid future, buying them (or buying the entire company, as Buffett often does) and waiting for the price to rise.

What Are the Benefits of Trading On The Stock Market?

Investment Gains

The most obvious benefit of buying or selling stocks is investment gains. It is the potential to grow wealth through value appreciation of assets (stocks) that initially draws most to invest in the stock market in an effort to secure their financial future.

Earning Dividends

Some stocks also offer the opportunity to earn dividends. Dividends can be a great way to earn short-term investment income, and who doesn’t want another income stream?

Diversification

Let’s not forget about diversification, which is another important benefit of investing in the stock market that is overlooked by many. A properly diversified investment portfolio allows losses in one sector of the market to be offset by gains in another, meaning the portfolio has the potential to be profitable overall.

Ownership

Buying shares of stock gives investors ownership in the company. Shareholders receive annual reports so they can learn more about the company, and they can vote on corporate board members and other business decisions. Some shareholder meetings are lots of fun, like Berkshire Hathaway’s in Omaha where Warren Buffet shares special offers on products from the companies he owns. Others can be tension provoking, if an activist shareholder (with far more shares than you) makes a move against the current management.

At Online Trading Academy, we teach strategies for short-term income, long-term wealth or both, depending on a student's individual goals. We also teach techniques to diversify investments and take advantage of opportunities in all asset classes.

Strategies For Stock Market Trading

Computer keyboard showing the enter button as a green BUY button

Having said all that, here’s how trading on the stock market works for savvy traders and investors who have been educated at Online Trading Academy. Our patented supply and demand trading strategy allows us to anticipate market moves with a high degree of accuracy by identifying supply and demand zones. Once price enters one of these zones it typically changes direction, often dramatically. The catalyst of that move may be an earnings surprise, or a natural disaster affecting its market sector. But the price move itself is caused by the herd behavior of novice investors who have been conditioned to sell and buy at the worst possible time.

To invest or trade on the stock market successfully with our strategy, price is always the single most important factor. Let’s say a stock is trading in the mid-twenties and a trader wants it to decline to $20 because they know, based on their analysis, that there are a huge number of unfilled buy orders at that level. They might wait for it to drop below $20, then return to that level and buy. (This is a hypothetical example of one of several entry strategies.) If it continues to rise, then they may be on their way to significant profits. And that’s how the stock market really works.

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions.

The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Past results are not a guaranty of future performance.

Ref: https://www.tradingacademy.com/financial-education-center/how-the-stock-market-works.aspx

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HOW TO PICK STOCKS

Which stocks you trade is going to depend on a number of issues, including your level of experience, how much capital you have available, and what style of trading you are doing. Whether you are trying to find the best stock for day trading, or you prefer other styles like swing trading, position trading or investing, your criteria for how to pick stocks should be written down as part of a trading plan (see Risk Management for more details on developing a plan). Your trading plan is dynamic, and, thus, will evolve as you continue to learn, develop skills and uncover your strengths and weaknesses.

Here are a few things to consider before you pick stocks:

How to pick stocks
  • Understand your level of risk and decide what is appropriate
  • No matter your personality type, develop a strategy for choosing stocks to invest in
  • Start by picking one stock and then analyze the results
  • Use trading charts to understand movement of stocks and the overall market
  • Finally, stick with your plan!

Choosing Stocks Based on Your Personality

Also, your personality type will play a part in the types of stock you trade. For example, if you are 23 years old, grew up on video games, have a fast mind and need to have a lot of action to stay focused, then short-term, scalping may be right for you. On the other hand, if you are 65 years old, like to think things through before making a decision then maybe swing trading low volatility stocks might be more appropriate. Whatever decision you make, be sure to think it through. You need to understand that stocks have different levels of volatility and velocity of price movement. By using tools such as Beta, Level I and Level II information, you should be able to see which is the hare and which is the tortoise.

Keep Risk Management in Mind When Picking Stocks

Determine what degree of risk you can live with and afford. Focus on creating a stock picking strategy that is designed to preserve capital and control risk. The most important objective should be to preserve capital. You need to make sure to “stay in the game!”

Learn how to pick stocks from the experts at Online Trading Academy

There is a whole spectrum of stocks to trade, each with different levels of volatility, price, and volume characteristics. Start out by minimizing risk. As your skills, experience and any successes increase, you can consider expanding risk associated with the stocks you pick to trade.

One of the worst mistakes new traders can make is to “just start trading” and “see how it goes.” You need to analyze and calculate, making informed and educated trading decisions. Just like starting or growing a business, a plan is essential.

Keep it Simple When You Choose Stocks to Invest In

Keep it simple! Whatever stock picking strategy you decide over the long term, start out by trading just one stock. Watch, study and learn that one stock. Each stock has its own personality and characteristics. You need to understand these “habits” to anticipate the ideal moves to make. Study the charts at numerous time frames - intraday, daily and weekly. Over time, begin to add one more stock, and then another, and so forth. While you’re trading one stock, it’s okay to study the behavior of a few other stocks and learn their behavior. Once you’ve moved further along the “learning curve,” begin to trade one of the other stocks you’ve been studying. You will already have an understanding of its behavior since you’ve been watching it.

Focus on stocks that align with your trading plan and allow for consistency!

Do not change your criteria during the trading day – only when market is closed. Stick with your plan. Changing a plan in the middle of trading will allow you to mentally “cheat” on your plan. This leads to a general breakdown of discipline.

Some real life examples are listed below:

Ways to Pick the Best Stocks for Day Trading

  • I will only trade 5 stocks – 1 at a time until comfortable
  • Price between $20 and $40
  • Average 30-day volume of between 1 and 2 million shares
  • Medium degree of volatility
  • No biotech stocks (high intraday volatility)
  • I will study my 5 stocks each night at multiple time frames
  • Perhaps following S&P Futures

Ways to Pick Stocks Swing Trading (2 days to 3 weeks)

  • I will pick 50 stocks to trade– 1 at a time until comfortable and I understand this may take a lot of research
  • Price above $25
  • Average 30-day volume greater than 500,000 shares a day
  • 25 for Long watch list
    • Strong fundamentally (increasing revenues and earnings, high relative strength, in leading sectors)
    • Above 200 moving average
    • Perhaps following S&P Futures
  • 25 for Short watch list
    • Weak fundamentally (declining revenues and earnings, low relative strength, in weak sectors)
    • Below 200 moving average
    • Perhaps following S&P Futures
  • Stochastics signal

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions.

The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Past results are not a guaranty of future performance.

Ref: https://www.tradingacademy.com/financial-education-center/how-to-pick-stocks.aspx

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