Value Of Research In Stock Trading
Most investors remain on the constant look out for secrets, tips and tricks of investing in stock markets. These secret tips and tricks are given by people who supposedly have the inside information about a company’s performance. Such information can prove extremely dangerous. Everyone has an opinion and chances are that it may not be correct. The information divulged by these knowledgeable and reliable sources invariably result in loss of money.
Then there is that famous ‘your brother-in-law’s brother-in-law’ or, ‘some guy at work,’ theory that is followed too often by numerous investors. This guy tells you that a particular stock is “really going to deliver you unprecedented returns”. You believe him and rush to buy that stock only to find you have lost a good chunk of your hard earned money.
You also hear stock market pundits airing their views in hyperbolic terms on the TV or radio about the now-or-never investment opportunities. Chances are that some company to get rid of its stock has pitched the expert. It is called “pump and dump” policy.
You pump up how great a stock is and then hoodwink the viewers into buying it. This, however, does not mean that every stock that is recommended in the media is dud. Sometimes they are really high flying stocks. This is only to underline that not every stock that is recommended on the TV should be purchased.
There are other investors who willingly believe the street talk or rumors and stake their hard earned money in buying stock.
No investor can survive successfully in a stock market by investing in stock trading on the basis of tips and tricks presented through the media, revealed by friends or rumored on the streets. Even if the news about a stock being great happens to be true, it is no secret that by the time it reaches the average investors, the smart guys have already done away with it. They have already sold or bought the stocks before they make news. The stocks with high potential are, therefore, already traded by the vigilant investors and by the time the news spreads, their rates become too high or too low.
You can profit from such opportunities only if you have learnt to do your own research and do not rely solely upon others. If you do your own research by using various research tools, you develop your own intuition or hunch in course of time and that hunch is, in most cases, an unfailing source of correct information.
To start with you must study the historical background of the stock, which you want to invest in. You must obtain all the authoritative financial documents of the organization. You have to understand the financial trends of the company by analyzing its financial documents. You should also learn to calculate the PE ratio, which indicates the value of the stock. You should check the balance sheet and cash flow statement to understand the extent of its cash flow and long-term debt.
All this information can help you to undertake the technical and the fundamental analysis that enables you understand the specific areas of a stock movement, such as, sales figures, earnings, assets, markets and management performance.
The best way to access the stock trading research tools is to open an account with a good stock brokerage firm. A good stock brokerage firm usually provides powerful research tools on its website. It educates the investors about the ins and outs of stock trading and how to use the research tools. These tools are usually complimentary and allow the members to scan for the market opportunities, view technical charts and much more. You can scan latest stock market news and historical charts. You get real time streaming watch lists and customizable stock screening and strategy back testing platform. There may also be advanced technical stock charting platform. You may avail ETF screening tool with numerous customizable screening criteria. If you are a beginner, you are provided training in stock trading research through a hypothetical portfolio that allows the combination of stocks and ETFs to view historical performance and historical charts.
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Tags: Research, Stock, Trading, Value
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