If you want to become rich and successful with stock trading, in the long run, it is a must for you to know how to conduct your research and perform a proper analysis. Without research and analysis, your stock trading is more likely to be a gamble than a well-informed, careful decision. Here are some tips for you on how you can research stocks:
The Fundamental Analysis Method
In the fundamental analysis method, you dig deeper than the stock price to learn more about the company and how it has been performing in the last few years. Many experienced long-term investors will tell you that a company with a good stick price doesn’t necessarily represent an accurate picture of the company’s performance.
This is why it is essential to look into other economic and financial factors of the company. You will need to know how to analyze the balance sheets, consumer behavior trends, and other indicators. If you are new to investing, it is best to stick to the fundamental analysis method.
The Technical Analysis Method
In the technical analysis method, you will want to focus only on the stock price and study its fluctuations. Based on these trends, you will be able to make accurate predictions and take advantage of the opportunities. This type of analysis is commonly used by day-traders as it works excellently for short-term investments.
For this method, you will need to know how to read charts, and you will also need to get your hands on all the right tools. Remember that it takes time and patience to get a good sense of the market forces.
The Qualitative Analysis Method
In this type of analysis, you will need to look into the business model and management of the company along with its ability for competitiveness in the market. You will need to check whether the company has the potential for future growth. Many investors who use this method also like to check whether the company has higher employee and supplier satisfaction levels.
Become Well Versed with the Investing Metrics
Regardless of what method you pick to research your stocks, you will at some point run across important metrics like price-to-earnings (P/E) ratio, price-to-earnings-growth (PEG) ratio, price-to-book (P/B) ratio, and debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio. Hence, it is important to become well versed with them as they can give you insights and understanding into the company’s financial performance.
Where You Can Find the Data for Your Research
If you wish to get started with your research, look for SEC reports and company press releases. You will also find plenty of websites with articles and videos that will help you become aware of the industry trends and the companies’ performances.
To Sum Up
Researching stocks may seem like rocket science at first, but it becomes very easy once you get the hang of it. You can also consult your broker for more information. Make sure to develop a proper investment strategy based on your research.