This question should come up every time we get called for a trade, if we follow the market, or are looking for a short-term investment. To make sure we don’t miss out on the value of a stock or portfolio, you need to think long-term and ask the right questions. Let’s look at some of the important questions we should be asking when we’re looking to invest or short-term trade a stock:
What are its fundamentals?
You can start looking at a stock’s fundamentals by looking at the chart, where the stock price rises or falls. If the movement is rapid, it means the stock has potential. Conversely, if it’s stable, it suggests the stock has no fundamental value or is just an exorbitant risk; it’s a great idea to stick with it.
What are its earnings?
Most companies have earnings over time — and if their earnings are low, chances are they don’t have much to offer. Similarly, if they do well, the stock likely has value, so try not to buy it until you feel comfortable.
What will the stock price trade toward?
Stock prices are often manipulated, and a low-priced stock will often trade higher. The goal is to create a long-term trend, such as the stock going higher, as opposed to an immediate short-term gain, as a trader might get fooled by trying to make a quick trade.
What is the volatility?
Many companies have high volatility, because their earnings are volatile. You’re more likely to see earnings being traded very low and then going up after some news releases.
Will I get a return in my portfolio?
A higher-than-average return or earnings on something isn’t necessarily bad, because it’s more likely to be reinvested or be a short-term gain. Investors can also get a higher return due to higher stock prices if investors buy cheap and sell high during the period of the high-price period. Another common investment strategy is to buy a stock when it’s undervalued and sell it when it’s overvalued, and then get a higher appreciation or return from those dollars.
Will I get a return on my investments?
Another common investment strategy is to buy a stock at the peak and sell it when the high-price period ends. There’s a great chance you’ll see more gains when you’re in that situation.
Will my investments be worth more with this investment strategy
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