Candlestick Trading Blog
To be successful in long term investing it is important to learn fundamental analysis. Fundamental analysis is the use of financial information about companies and economic information and forecasts applying to market sectors to predict future stock price. Investors learn fundamental analysis in order to profit from investing. The longer term the investment horizon the more important it is to learn fundamental analysis and use it. The shorter the investment or trading horizon the more important it is to learn and use technical analysis of stocks. Even for the long term investor it is important to understand both fundamental and technical analysis.
An investor will pick a stock with a substantial margin of safety, excellent price to earnings ratio, and price to sales ratio. Then he or she will want to buy the stock in the most cost efficient manner. This may entail placing limit orders at a given stock price or buying call options on the stock. In either case the investor will likely not buy at market price and will likely use technical analysis tools such as Candlestick pattern formations in order to purchase stock, and eventually sell stock at the most advantageous price. For successful long term investing the first step is to learn fundamental analysis. It is not necessary to learn fundamental analysis in all of its intricacy all at once. The investor will find that in picking stocks that he or she will develop criteria. Looking for stocks with a low price to earnings ratio is a good place to start. It is also a very good idea to start by investing in things one already knows something about. In this way the investor already has done fundamental analysis without even thinking about it. For example, a sports enthusiast who plays softball may have a preference for a certain brand of glove, bat, or ball which everyone on his team likes. Finding a good product is a good first step in fundamental analysis. The next step would be to investigate the company that makes the products. What are their cash flow ratios? Do they have money in the bank or a lot of debt? What has their stock price been doing recently? If a company has a low level of debt that means it is financing operation with its cash flow and not by borrowing. Another measure of liquidity and company health is the quick ratio. This is current assets minus inventory and the result divided by current liabilities. This is a measure of how much cash and equivalents that the company has to work with. By starting with stocks that make products that you know about you will not need to learn fundamental analysis all at once. However, with time the investor learns to successfully evaluate everything from hot penny stocks to high tech startups. Value stock investing is based upon successful analysis of a company’s prospects, its forward looking cash flow. Learn fundamental analysis and learn how to invest in stocks successfully over the long term.Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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