Hi Folks.In this post let us discuss about the basic analysis to be done before i make a decision about my stock.
People generally say U.S market is up and so will be the indian market .Ofcourse such dependencies work,but how far these factors work and how much we can rely on these is the million dollar question here.
If you are a first time trader/investor you may be wondering how the money makers are very much in sync with market ups and downs predicting the market conditions and making millions in a day.NO ONE KNOWS THE FUTURE,SAME ABOUT STOCK MARKET.But one can forecast/predict the future depending on the past and present conditions and same is the case with the movement of share price.An intelligent trader not only goes by a simple view of market sentiment and present market conditions but also goes through a thorough technical and fundamental analysis of stock as well as the market.So what is the basic analysis that i am going to do before i buy a stock is not a single but
3 types of analysis are done.These three are
1)Fundamental Analysis
2)Technical Analysis
3)Practical Analysis
Fundamental analysis is where you have a complete record of the company's basic information which includes company's products,turnover,market areas,market Regions,Net profit for past 'X' periods,management,achievements,Current profits,Deficits,Acquirings,Future growth plans etc.
Information about company's products helps you to know which are the rawmaterials/finished goods it's depending on and which can influence the company's share price.Information like market areas and market regions helps you to know which other indices can change the share price of your stock.Information about turnover and sales helps you project the size of the company and a capable management will make you relax so that any potential disasters can be easily handled by them increasing the investor confidence in the stock.Information about Current profits will definitely lead either to an up/down of share price.These are not exclusive and it depends on the trader/investor collect the max information about the stock so that he can forecast the future to a better extent.
Coming to the technical analysis of stock,there are many techniques which help you to make a BUY/SELL decision during trading.The techniques take past data of stock for 'X' periods and predict the future momentum and health of stock price movement.Some of these techniques include
1)Simple Moving Average
2)Moving Average Conversion and Diversion(MACD)
3) Relative Strength Index(RSI)
4)Exponential Moving Average9EMA0
5)Volume Analysis
6) ON Balance Volume Indicator(OBVI)
Coming to the last analysis to be done ,that is practical analysis which is mainly a combination of
output of above 2 analysis and market sentiments which include other indices movement,News,Budget or Company current aqcuirings or any natural influences which may move the market for a short term.
These 3 analysises help a first time trader/investor make money from market with confidence.So why not you start trading/investing with these in mind from today?
people , catch you on my next post with a detailed information on various techniques used for technical analysis of a stock,which help you to forecast the momentum of a stock before Udayan does it on CNN.Bye for Now
