What are the key factors to take into account when picking on stocks?

Question by B: What are the key factors to take into account when picking on stocks?
Im a beginner. Planning on buying some stocks tmrw. Is it possible to make money every month? if yes, what type of companies should i go for? growing companies or those major companies? just buy the shares today and sell them in a month and make money? does that work? i will appraciate some detailed information to get me started..
and please, what are good ways to follow up on the companies i buy the shares of?

Best answer:

Answer by jerry
As a new investor let me caution you. When i first stated i made a little money and then decide to risk much more. I soon found that i lost several thousand dollars very quickly. I had read many books and thought i knew what i was doing. The first stock i bought i did much research on and put every thing i had into it about 4000.00 at the time. It went up and i cashed in the stock quickly. Putting all your eggs in one basket is not good unless you are trading and not investing. Trading is done usually much more often and can be daily or weekly or hourly depending on how you want to do it.

It ends up i should have stayed with that first stock. I bought it @ 40.00 and sold it @ 45.00 and it went from 40.00 a share to over 120.00 but now is 33.00 a share the stock was Garmin back when GPS was going crazy.

My point is this its hard to know when to sell and when to buy it takes time to learn this. I have learned much from watching web seminars and reading books. However the best advise i ever got was on capital preservation. Research your stock and when you chose one if its for long or short term decide what you think the stock will do in that term you are looking at and look for a entry point based on technicals and if you buy the stock and it quickly goes down or it doesn’t do what you think it was going to do get out and live to trade another day! Take a small loss and learn from it. Continue to watch the stock and find out what to do better next time. If you discipline yourself to loose little. Then you only need one time out of 4 or 5 to make money. This keeps the odds in your favor. Some long term strategies like CAN SLIM include limiting your losses to 8% setting a stop loss order at this point. In short term investing i take a lot less than this.

As you learn you will fall into what feels right or comfortable to you. There are several different kind of traders Long term investor, short term trader, day trader, swing trader, value investor, income investor, dividend investor, and many more.

As far as market analysis two basic camps here Fundamentals and Technicals, you don’t have to be one or the other here. The best investors i know use both methods together. I lean more towards the Technical side because i understand it more numbers have always been easy for me. But fundamentals will help you especially on a longer term basis. Investors for the most part use fundamentals as they are longer term, traders use technicals more generally. Some long term investors use Fundamentals to chose the stock and technicals to find the best entry point.

Fundamentals = balance sheets, earnings and income statements, Revenues, cash to book values, profits, cash on hand, P/E ratios, Yields, dividends etc. etc.

Technicals = Charting of trend lines, Moving averages, Price, Volume, Monthly Weekly Daily Hourly and so on charting. many more things make up Technicals as well.

I further suggest you go on your brokers websites and they will let you practice what we call paper trading, which is where they open a virtual account or not real account and pretend you are trading. They will start you with like 25,000.00 fake dollars and keep track of your trades and calculate the profits and losses it will give you a better understanding of how things work without risking real money.

Know better? Leave your own answer in the comments!

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