Company Stock analysis step by step
The analysis necessary to obtain a general picture of the company consists of a number of steps. Remember – even if on paper the company looks very attractive, there are no guarantees that it will work the same way in the future.
Development of analytical skills and own trading strategyis better done step by step. However, you should devote enough time to developing these skills. The method that we give below is one of many similar ones in technical analysis. This approach works for many, but personally you may not be right. Be careful.
Determine the level of stock prices that will suit you based on the size of your account. If you start with 20 000 rubles. on the account, then with the help of margin lending by the broker you can use up to 40 000. Of course, for using the borrowed funds the broker will charge you.
When you first start trading, do not use borrowed funds. Trade only on your own and keep records of how much money you spend.
If your account is 20 000 rubles, then by trading 100 shares, you can purchase securities without a loan in the price range up to 200 rubles. per share. Accordingly, if you want to buy 1,000 shares, then their price should not exceed 20 rubles. Do not make a common mistake, trying to buy as many shares as possible. After all, the value does not have an absolute value (how many rubles rose or the price fell), and the relative – by how many percent the price has changed.
In addition, a small price per share, as a rule, is characteristic for securities of the second echelon, for which during the day there may not be any transactions at all. But because of the low liquidity of such securities, there are more sharp fluctuations. A quick way to find a suitable group of shares for analysis is to go to the page with our market reviews and pick up stocks in the appropriate price range.
View the charts of the companies you have selected and find those stocks that have an increasing trend. Make a list of growing stocks. Some news agencies allow you to see the news story by companies. Find the latest news about companies from your list and think about how this news will impact the company in the future. Edit your list again.
Look at the reports. Are they good or bad? There is one good saying: “Buy on the rumors, sell on the news.” Often many people think that the announcement of good news will move the price up. Do not count on it. The current market price already takes into account all the known information.
Often traders are just waiting for news to sell after their release of shares at the peak. But how did they know about this, buying shares in advance? So, they pre-analyzed the stock and were able to make the correct forecast.
Of all the candidates remaining on the list, choose the company that best suits your criteria. Start watching the company using intraday charts. Learn how the price of its shares is growing and falling. Observe how the price moves in comparison with the RTS or MICEX index, depending on the market where the shares are traded. Pay attention to how the price reacts to world news and news of other large companies. And, of course, on the news of your chosen company.
Study the different market conditions so that you can learn to anticipate changes in the direction of the price movement. When you feel that you know this company well enough, try to trade it with shares. If your experience of working with one company for several months will be successful, you can come to the second company. Do not be greedy. Limit yourself to start by 2-3 issuers. In a volatile market, it’s hard to follow many stocks right away. Over time, you will have sufficient knowledge of many companies to quickly switch from one to another if the stock is first located, for example, in the consolidation zone (lateral movement).
If, for some reason, the company selected by you tramples on the spot – throw it and turn attention to another. Also do not forget about risk management. Use stop-loss to exit the position, if prices suddenly go down. Acceptable level of stop-loss can be from 5% to 8%, approximately so can change the price of shares for the day. When buying 100 shares of 60 rubles each, the investment will be 6,000 rubles. The level of risk should be limited to a price of 55-56 rubles. This means – if the price first increases, and then suddenly falls below 57 rubles, then you should set a stop order for sale at 56 rubles to limit your loss at 7%.