Stock analysis is also referred to as stock research. The objective of this analysis is to determine the best time to buy and sell stocks. That doesn't sound too complicated does it. In reality, it really isn't as complicated as you might think.
There are a number of different types of research when it comes to finding not only the best stocks to buy, but as stated above the best time and price to buy and sell them. The entire process of determining when to get into stocks and when to get out of stocks is referred to as market timing.
While it's always possible to simply select a particular company stock and just buy and hold there are numerous opportunities to profit from the variety of shorter-term moves that happen in the stock market every single day. Although there are two basic different methods used to evaluate stocks, stock market technical analysis is most often used by traders seeking short-term profits. Here are some of the steps involved in analyzing stocks for that purpose.
The very first step is to decide which financial instrument we are going to trade. Remember that there are thousands and thousands of stocks so one of the first things which must be done is to single out one that we're interested in. This can be done in any number of ways. One way of doing this involve the use of a stock “screener”. A screener is a piece of software that will allow you to input certain criteria and will scan the universe of thousands of securities to select only those that match the criteria you chose.
If you're looking for short-term trading possibilities are even daytrading possibilities, then you will definitely need a stock which displays a higher level of volatility than most. The reason for this is that since the time frame you are trading in is abbreviated and the stock has much less time to move than if you're trading much longer-term. Day traders most likely won't be interested in anything that moves less than $0.10 one way or the other during the trading day.
Once you have selected your stock that you want to trade and the time frame that you want to trade your next step is to determine which direction the market is likely to go. You'll need to know this because you'll have to decide whether to buy, sell, or simply stand aside. Longer-term traders will be looking to trade with the trend. This type of trading is known as trend following. Short-term traders may trade with the trend or in a countertrend fashion. Traders of this type rely heavily on the location of short-term support and resistance levels. They will either trade with the trend using a breakout of these levels or they will fade the support and resistance levels to trade against the short-term trend.
So the basic steps involved in Stock analysis are to select what you want to trade, determine the trend, and then either enter the market or stand aside based upon what your trading system dictates. Quite naturally, an integral part of all of this will be the inclusion of whatever risk control measures your trading strategies dictate.
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