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Remember, as a successful investor your future security improves. As the population ages and more people rely on social security you can expect social security will provide very little for you. Now is the time to take control of your financial future. YOU CHOOSE.
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Many books on Trading and Investing cover these principles as a guide to maximise your gains and minimise your risks. These simple Technical and Fundamental Analysis rules have been summarised here to help you gain a better perspective when investing or trading. In no specific order.
RULE 1. Review with caution any over bought stock. In a chart, you may choose to use an indicator from the Oscillator family, say the Relative Strength Index. If a stock is close to, or, over an Index reading of 70, it may be over bought. If the stock is close to, or, under 30 it is potentially over sold. When looking to select stocks, it is often better to buy stocks that have recently been oversold but are now working higher (as evidence by the indicator reading moving from an oversold Index level of below 30 to above 30.
RULE 2. Buy into a positive trend, as the saying goes ‘the trend is your friend’. Use a moving average, e.g. 30 days. Ensure the stock price is above the 30 day moving average. Be on alert when the stock starts to break below the 30 day average.
RULE 3. Implement and stick to an ‘Investment / Trading Strategy’. Never take a position in a stock without pre-planning an exit strategy. That is, have a plan to sell at ‘X’ profit, a plan to sell at ‘X’ loss ( known as a stop loss, or a trailing stop loss which follows a positive trend). And lastly, a plan to move out of that stock in ‘X’ time if it is not meeting your criteria immediately. You will define X depending on your tolerance to risk and your personal objectives. 'Plan a Trade, Trade a Plan'.
RULE 4. Look at strong historical (liquidity) volume levels, that is: stocks with consistent high volumes, and look for stocks where the volume is trending up in line with the 30 day moving average of price.
RULE 5. Choose companies which are fundamentally and financially healthy. Look for;
Low Price Earnings Ratio’s, typically less than 25 or less than their industry.
Find companies with good Earnings Growth
Should have solid consistent profits and revenue growth
Dividends Paid where possible.
RULE 6. Review the Industry the stock belongs to before making an investment decision.
Is the Industry ‘Out of Favour’?
Has the industry experienced growth?
What is happening to other stocks in the same Industry?
These basic rules are some of the foundations to Technical and Fundamental Analysis. By following these rules you can confidently review the market, find opportunities which meet your personal objectives and implement a strategy to maximise gains and minimise risk.
This information is not provided as recommendations, personal objectives differ between individuals, this information provides a guide to implementing Technical and Fundamental Analysis criteria.