Investing and trading in stocks and all other financial instruments requires dedication, persistence, and continuous learning. It is crucial to establish a set of proven rules for making buying, selling, and holding decisions, considering the various factors that influence the market.
Select a suitable online broker that aligns with your investment style is essential. TC2000 is leading online broker we recommend.
Both novice and experienced investors have historically used fundamental and technical analysis to identify promising stocks.
To create an effective investment trading system, consider the following fundamental and technical aspects.
Quarterly and Annual Earnings
Analyze leading companies with at least a 25% plus quarterly increase in EPS Earnings Per Share. Focus on those that have met or exceeded this EPS gain in the past one or two quarters, with sales growth of at least 25% in the most recent quarter. Additionally, prioritize stocks with strong annual EPS growth of 25% plus over the past three years and robust sales increases.
Invest in Market Leaders
Concentrate on true market leaders, which may not sometimes necessarily be the most well-known companies. Look for stocks that drive trends within their respective industries and exhibit exceptional relative strength to the broad market. Regularly review the top most actively traded stocks to find potential future trade opportunities.
Institutional Money Flow
Leading stocks usually attract institutional investors, such as mutual funds and other large investment firms. Observe stocks with increasing institutional ownership, particularly from top-performing mutual funds. Use accumulation distribution indicators to track money flow into and out of a stock.
Primary & Counter Trends
To minimize risk, trade in the direction of the primary trend. Even if a stock has strong fundamental metrics, it may struggle to rise in a weak broad market. Approximately 70% of all stocks tend to follow the overall market direction. Thus, focus on aggressive buying during an uptrend and consider selling-short during a downtrend, based on daily, weekly, and monthly chart analyses of support resistance and accumulation distribution indicators.
Volume and Supply & Demand
Check the stock’s volume when it clears a low-risk high-reward buy entry point. High volume in an uptrend indicates strong demand, confirming a potential continuing uptrend. Also take notice of it’s daily average volume and when volume spikes significantly.
Watch for New Breakthroughs
Leading companies often experience earnings growth due to the introduction of new innovative products, services, and or research breakthroughs.
Analyze the Market Trend
Always begin by analyzing the current market trend before deciding to buy, sell, or stand aside.
Assess Fundamental and Technical Metrics
To maximize profits and minimize losses, evaluate both fundamental factors like sales, earnings, products, and industry trends, as well as technical aspects such as price, volume, accumulation distribution, and support and resistance on stock charts.
Timing Your Trades
Use stock charts to identify low-risk high-reward buy or sell setups. This technical analysis helps in initiating new positions, setting stop-loss levels, and taking profit price targets.
Knowledge > Dated Goals > Action Plan > Taking Action = Success
By combining fundamental and technical analysis, setting clear investment goals, creating action plans, and diligently following them, you can increase your chances of becoming a successful investor and trader over time. Remember, consistent learning and action are key to achieving profitable results in the financial markets over the long-term.