Candlestick Trading Blog
Although everyone who is investing in the stock market wants to say it; many have said it when it was the farthest thing from the truth. The statement, “I beat the stock market” is a goal of every trader, successful and unsuccessful alike. For that matter, what is wrong with wanting to play the stock market game?; the measure of a trader’s success is his or her performance against its standard. In order to understand “winning the stock market game”, it is important to define what the stock market is. The S&P 500 Index is widely considered the barometer for performance. Such a standard has its flaws since S&P is heavily weighted with large cap stocks. With that being the case, let’s look at a couple of other measurements for winning the stock market game. Small Cap Stocks If you are trying to win the stock market game and you are looking at small or mid cap stocks, the S&P 500 isn’t a real good choice for comparison since large cap stocks move differently from small and mid caps. In such a case, it might actually be more of an accurate comparison to review your holdings against a stock fundamental analysis metric such as earnings per share to reflect profitability in the context on a per share basis and not the total corporate earnings. This metric allows for differing sizes of companies and still permits you to win the stock market game if your portfolio diversification has better earnings than the market. Shareholder Value It is important to understand your own portfolio when evaluating whether you can win the stock market game. If you hold a portfolio that is heavy in long term investing, it probably won’t compare well with sectors that are more short term in nature. Companies that focus on building shareholder value make decisions that might negatively affect the earnings in a particular year, but are value added move in the long run. For example, companies that are willing to shed unprofitable divisions and close product lines that no longer meet earnings goals take losses in the current year, but position themselves for a better future. Again, a fundamental analysis metric might make more sense; in this case, compound annual growth rate might be a better choice. Instead of using the current year alone, it might be more informative to use a three to five year window. In long term investing, winning the stock market game every quarter or year isn’t the ultimate goal.
Conclusion Beating the stock market is a reasonable and attainable goal. It requires that the trader implement a stock trading plan, perform fundamental and technical analysis, and utilize a stock trading system like Japanese Candlesticks. How you get to the bottom line at the end of the quarter or year is just as important as the number you when you arrive. Remember, the measurement of a successful trader is the bottom line. If the profit isn’t measuring up, it is possible that the investor needs to revise the stock investing system being used. But if the trading plan is sound and the results don’t seem to reflect it, the blame might lie with the sector of the stock market being evaluated. Above all, remember with a solid approach and careful research, you can win the stock market game! Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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