As mentioned earlier, investing is one of the most important tools for financial planning and savings management, and financial markets, especially the stock market, are among the most popular areas of investment or trading for anyone with extra capital.
He didn't enter it, it certainly occupied the minds of many thinking and planning what it contained. It has risks arising from price fluctuations and this is the source of its high returns.
The first and most important rule is not to invest your money in a business that you do not understand, so do not get caught up in advertising and publicity of brokers and stories of big companies.
Investors, financiers, businessmen, and the declared huge profits from trading or investing in the stock exchange because it is not easy and is not limited to buying a share at a low price, holding it for a period, and then selling it.
Higher prices to get big profits. It takes extensive study, familiarity, and risk management to achieve your goals, which we will try to summarize on several grounds.
Choose the appropriate investment strategy
Before you go ahead and enter the market and buy stocks, it is important to examine the different types of investment strategies and choose the one that best suits your style, psychology, and capital. Investing strategies generally fall into three main types used by the most successful traders:
Value investment
They pick stocks that appear to be trading undervalued or undervalued, or that the analyst believes market prices give them an undervalue.
This often happens in stocks or companies that are over-sensitive and overreacting to news, especially bad news, resulting in price movements that do not meet the company's financial standards, and this is where reliable financial analysis comes into play. In investment currency, a kind of high-quality long-term company.
Growth investment
It is a type of investment in the shares of companies that grow above their counterparts in the market in terms of business volume and profit, as the continuous growth in the companies’ business creates higher investment opportunities and thus higher returns.
These investments have attracted many investors to the startups, and these companies have achieved great returns with the success of their projects compared to other companies in the same industry or the market as a whole. Or new companies are often at high risk compared to the stocks of other companies whose trading, performance, and follow-up have been tried.
Income investment
It is a type of investment that provides semi-fixed returns periodically, such as corporate bonds, which usually provide higher returns than government bonds, because the type of risk is higher. Dividends to shareholders and this type of investment often lead to better risk management if properly studied and informed about its tools.
Check out the basics of financial analysis "metrics"
Fundamental or financial analysis in the stock market depends mainly on the financial statements of companies, where large percentages or measures are calculated to determine the actual or fair value of the securities issued so that they can be compared with the market value.
the most important ratios are:
1. P/E Ratio
This ratio compares the share price to the company's earnings per share, which is calculated as the company's earnings divided by shares outstanding. It is an indicator of the company's profitability.
For example, suppose a company listed on the US Stock Exchange has a net profit of $5 million and 3.5 million common shares.
Earnings per share = 5 / 3.5 = $1.5 per share
Suppose also that another company has a net profit of $7 million, owns 4.2 million common shares, and has a payout of $2.2 million in preferred stock.
Earnings per share are EPS = (7 - 2.2) / 4.2 = $1.14 per share.
2. Debt-to-equity ratio or D/E
This ratio helps determine the amount of debt or liability on a company's equity and is an important measure in corporate finance because it is a measure of the degree to which a company finances its operations with debt rather than its resources. High debt levels are bad because they indicate a bad financial condition of the company and thus can lead to bankruptcy.
3. Price-to-book ratio or price-to-book ratio
Because book value is a cost-based accounting measure and reflects past profitable rights issues, this ratio compares the share price to the company's net asset value and then divides it by the number of shares outstanding.
Losses into account, i.e. if the company liquidates all its assets and pays off all its debts, then the residual value will be the book value of the company.
Don't choose a job/sector that you don't understand
One of the most common mistakes stock traders make by choosing stocks they don't understand how the company operates is trading and investing blindly on a recommendation or scam without fully understanding how things work.
Choose companies that have solid, easy-to-understand business models that produce everyday services and products that you may have experienced or heard about every day.
Ask yourself first, what does the company do? And what kind of service do you provide? Is this service or commodity provided applicable and should it be requested in the current or future period? What are the opportunities and threats that you may face in the coming period? Is it a leader in its field or does it have superior competitors? If you can't find answers to these questions then you are not investing or trading, you are just gambling on luck.
And remember, it is very easy to get this information before you start investing, just by using the search engines, know and learn before you burn your money on a losing investment and you won't even know why you lost.
Search for profits
If you are not interested in speculation, look for profit. Dividends, such as interest, bond yields, or certificates of deposit, periodically provide a type of semi-fixed income, which most companies issue at regular intervals and where dividends are paid or distributed regardless of the current share price.
Choosing large companies operating in strong sectors with a clear economic impact, such as the energy sector, the financial and banking sector, basic materials or medicines, and health care, because recurring profits send a clear and strong message about the company’s prospects and its strong performance.
a company. In addition, the company's willingness and ability to pay steady dividends over time is strong evidence of the strength of its financial fundamentals.
Technical analysis of stock price charts
Technical analysis or chart reading is based on the various stock charts used by both fundamental and technical analysts.
Reading them, though they may seem easy, requires skill, comprehension, and study; Which can take time to acquire and understand the different techniques by which trends can be identified. An expected move for short-term speculation, medium-term trading, or even long-term investment
Price action determines everything and is the main principle on which the technical analyst relies, but the combination of financial fundamentals and technical analysis always leads to stronger positions and higher results than relying on technical analysis alone but remember this before making a decision.
Trading or investing to treat it as an effective tool, do not overspend or neglect to ensure the continuity of the market and obtain the desired results from your trading or investment.
Tags:
US stock trading