Candlestick Trading Blog
A sound investment is commonly equated with a safe investment, one that is likely to grow in value and unlikely to lose money. In long term investing, however, inflation is an issue so that a sound investment needs to start by making more money, year after year, than the rate of inflation. Then the investor needs to look at investment grade bond investing as a comparison. When investing in bonds many investors have made substantial amounts of money in junk bonds. By pooling high risk bonds it is possible to reduce the risk that the whole pool will go bad and often gain a higher return than with investment grade bonds. To the extent that a sound investment means a buy and hold investment, the issue can get more complicated. Times change and markets fluctuate. This is where the issue of what is a sound investment gets murky. For many investors and traders a short investment horizon is more conducive to finding a sound investment and once short term profits are made the money is in the bank. To find a sound short term investment technical analysis tools can be as effective as fundamental analysis. Candlestick pattern formations can be as useful as looking as the price to earnings ratio, price to sales ratio, and forward looking earnings.
Intrinsic stock value is what long term investors look for in a sound investment. Such stocks offer the long term investor a margin of safety over the long term. What the margin of safety does is insure that the company will have assets and value even during bad economic times. It does not always mean that the stock price will go up and provide the investor with a profit. The short term investor and especially the day trader will look for the same sort of intrinsic value in a stock but the sort of value that will shortly be reflected in the stock price. The shorter term investor or trader is less concerned, however, with the fundamentals of the stock although he or she will do both fundamental and technical analysis. The trader will follow the stock involved, looking for how the market treats it. He or she will look at stock price history and stock price volatility. When the trader sees the right trade signals that a stock trend or market reversal is imminent it is a sound investment to initiate the trade. When the stock has made its move the trader will exit the trade and pocket the trading profit. No matter whether it is a long term investor or a day trader a sound investment can be defined as one promising profit. The long term investor is willing to sit on an investment for years. The trader may be in and out in minutes. Using tools such as Candlestick analysis and Candle trading tactics the trader and even the occasional investor can engage in successful market timing resulting in the purchase or trade being a sound investment.Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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