It has become extremely easy and affordable for any person with a few thousand dollars to invest and trade equities within the United States stock market but there is a lot of information to understand before one can make wise decisions. Before investing your hard earned money in specific stocks, you should have a clear understanding of what stock prices are based on, how to read financial sheets, and how to view and understand history and trends.
If you talk to anyone that actively trades or invests in the stock market the number one rule of thumb is to "do your homework". This is referring to the overall research on the stocks that you are interested in purchasing prior to doing so. This doesn't just include the past to current information but also what the company plans on doing in the near to long future to improve their business and grow. A stocks price is based on growth and even if the company is doing well right now it must have room and plans to show growth to maintain investors.
Each company that is publicly traded within the United States provides quarterly earnings that give investors an update of how they're business performed the previous quarter. Generally at this time, these companies provide guidance of where they expect to be financially for following quarters. Most stocks that are actively traded publicly have analysts from major banks that follow companies closely. These analysts typically provide their personal insight on the company's standings in comparison with the general industry which then provides their bank and following individuals the ability to have more information when choosing to invest. Throughout the year, analysts will upgrade or downgrade a stock based on how they expect it to perform in comparison to the market or sector as a whole. These evaluations as well as quarterly earnings reports can often cause big swings in a stock's price.
Once you have decided on a few stocks, the smartest way to invest in the stock market is to diversify a portfolio. An investor should choose about 5 stocks from separate market sectors. This is done because it is common to see entire sectors lose value in the same day. If you only hold one stock or stocks from one sector you are placing your investment at a greater risk. It is also known to build positions rather than purchase all at once. Purchasing a little at a time over a short period will help make sure your not purchasing before a dip in the stock price. To protect yourself financially, you should never invest money that you cannot afford to lose.
The only problem with that theory is that we all know it's a load of rubbish and you can prove it for yourself.
Take a child's plastic protractor, the kind you can buy at any grocery store for a couple of bucks and place it on a high point or a low point on any stock chart you like. Now look at the 50, 60 and 70 degree lines.
How many highs and lows hit one of those lines precisely? How many trading ranges fit snugly between two of those lines? And when I say snugly I mean to the penny.
And while you're at it look for chart gaps. See how often one of the three protractor lines I mentioned cuts through the middle of a chart gap. For many charts they cut through the center of 100% of all chart gaps.
How could any of that possibly be true if market pricing is random? How could any of what you're seeing be true if there's no rhyme or reason to stock pricing?
If you know anything about Fibonacci lines and ratios you know that high and low points on charts are often pinpointed to the penny by Fibonacci lines.
Again, how can any of this be possible in a totally random system?
The answer is obvious. It can't.
That means the system isn't random. That means there's a pattern to the system. And if there's a pattern to the system then it must be possible to detect that pattern and to make use of it. It must be possible to construct a mathematical formula that will predict stock prices at least as accurately as that child's protractor.
Can you imagine what it would mean to you if you could see that pattern clearly, if you had that formula for your own? Can you imagine the riches that could be yours? It would be equivalent to having a crystal ball and seeing into the future.
As things stand now the vast majority of traders are merely guessing which way the markets will go. Oh, most of them convince themselves that they have valid reasons for their choices, but deep down in their heart of hearts they know that all they're really doing is guessing.
That's why the vast majority of traders lose money, or at best break even over the long run.
Is that true when it comes to your trading?
In other words, most traders treat the markets the same way they treat horse racing. Only when you bet on a horse race the betters have the courage and the honesty to call it what it is: gambling.
But if there really is a pattern to stock market pricing, and if that pattern can be defined by a mathematical formula, then making short-term trades on stocks would no longer be gambling. You would no longer be a monkey tossing darts at a list of stocks.
So how can any of this benefit you? How can you make money with any of this?
Start by admitting that you're doing nothing more right now than guessing which direction stocks are going. Even if you guess right several times in a row you're still doing little more than tossing mental darts.
Next, recognize that stock prices aren't random and never have been. Recognize the fact that there IS a pattern to stock pricing even if you can't clearly see that pattern just yet.
Finally, spend whatever time you must in decoding the pattern that defines stock prices. If you can break the code and find the formula that reveals the pattern, just think what that could mean to your future stock trading!
Because, ultimately, anything less and you're just a monkey tossing darts at a list of stocks.
Both Steven Cancel & Larry Parr are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Steven Cancel has sinced written about articles on various topics from Water Garden, Recreation and Sports and Interior Design. Visit for great tools to determine whether or not you are making a wise investment. Article written and distributed by Steve Cancel at Secure Link -. Steven Cancel's top article generates over 135000 views. to your Favourites.
Larry Parr has sinced written about articles on various topics from Finances, The Wall Street and Finances. Larry Parr is a true stock market Maverick who has spent the past 19 years studying stock patterns and the math behind them. His discovery will make a few traders very, very rich and the information won't cost even one penny out of your own pocket, now or. Larry Parr's top article generates over 1300 views. to your Favourites.