2 Ways to Analyze Stock Investments
Stock market investors analyzed their choices to purchase or sell by two methods. One investment strategy is analyzing the company and its financial records. The other method is to look at the charts for recognizable movements and make decisions to buy or sell based on this technical data. Both methods produce successful results for the traders who use them.
Financial investors check the earning history and financial records of the company they are interested in. These investors want to see that the company has growth, year-over-year or quarter over quarter, positive movement. They want to see stability in the company both in the stock and in management. Quality control of expenses and operating costs is important. A competitive advantage by offering superior service or product is a plus for a company under consideration. These corporations may have a cost advantage where they can sell things at a lower price, they may have name recognition causing customers to seek them out and they might have price leadership. Investors want to be sure these companies are in an industry of growth or stability; companies that make buggy whips will have a hard time attracting investors today.
This type of investor spends time researching each potential investment. They become experts at reading news releases and understand that new released after the close of the stock market on Friday is probably negative and needs to be carefully read and researched.
People that analyze the chart patterns believe that the market will repeat itself and they can predict the future movement of the market by finding recognizable patterns. Many of these patterns have interesting names like Elliott wave, head and shoulders, Andrews Pitchfork, cup and handle, triangles and wedges. These traders also use the volume of the trading activity (number of shares traded), called strength indicators, moving averages and oscillators to show the movement of the action and when one of stocks is overbought or oversold. By carefully steadying these patterns and price movements, these investors rely on the market to tell them when to get into the market and the price they should buy or sell at.
This type of investor is aware when major news events will happen and plans the trading strategies around them. News, like employment reports, moves the market erratically for a short time.
Stock analysis software is available to assist both kinds of traders. This software is often free or offered as a free trial version for traders to use. The trader needs to understand his or her trading methods to be able to find the software package that will work best for them.
Both of these systems for finding good stocks to buy have proven highly effective. A stock market investor needs to find a system that works for him or her. Some people are more interested in the financial data on a company and others will be more interested in the data created by the price action on charts. Both ways make money in the hands of the trader who understands and processes this information correctly.
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