Learn The Basics Of How To Pick Stocks
Have you learned the essentials of how to read a stock chart yet? If not, you had better learn fast. Otherwise your ability to pick winners in the stock market will never progress beyond the guessing stage. Here is a quick synopsis.
A stock chart is simply a graphic representation of the price of the stock over a period of time, whether it’s a one year period or several months or more. In order to predict accurately where a stock price is heading, a pattern must be found in the price itself. Of course the fundamentals of the company should also be viewed overall as well, whether they are sound financially is always important. Major announcements in changes of the company such as a CEO leaving a new product launch may come into play also, but the stock price chart is foremost in our tools of predicting future price point.
Price changes in a stock represent a direct result of market supply and demand for the stock which can change almost daily depending on several factors. Knowing whether the stock price is going up or down due to some strength or weakness, or just a general whim of the market, is what takes skill. Most price changes are a result in the market itself, such as news of a Federal Reserve policy change, an event in a foreign country, or the announcement by the president about some action in the near future. These can generally be ignored but you must have knowledge of stock market chart.
What can’t be ignored are the strong advances of a stock off the base price. The base price of a stock is a point after a stock makes a strong move upwards; it will then naturally have a small correction (come down in price) as people sell out and take their profits. This natural correction in the stock brings the price down a little bit, but the stock will then find support at a certain point. In a strong base, the stock is unlikely to drop below this support level. This support level is a base, which can last for a length of time before moving higher and possibly finding a new base. Learning whether these base levels are real or faulty is the key to picking stocks accurately.
If you study stock charts of past winning companies, that had the classic up trending price moves that clearly are due to accurate bases and strong indicators, you will get more experience in finding these types of companies in the future. Recognizing these patterns is essential to picking good stocks. Studying the chart of a stocks price can tell you whether it is in a position to buy now, or whether it is in a too far extended price point above the base price and is due for another correction. Timing these correctly is the basis for making money in the stock market. Unfortunately the only way to learn is by experience. Find knowledge in stock market chart is the key.
Remember that patterns in the stock charts show amazing similarities; this is due to the nature of the market. Companies come and go, but human nature is always the same and the laws of supply and demand are as well. History repeats itself again and again in this way, and learning the basics of reading stock charts will help you to find a method of picking winners more often than most.
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