| Fundamental analysis. | | | | weekly as well as monthly charts, the picture is |
| Fundamentals analysis says the best way to predict | | | | intuitively more complete. This is equivalent to |
| the future trends of a stock is to understand the | | | | understanding how the short, medium and long-term |
| financial figures of the underlying company. The | | | | investors are viewing the markets, after all three |
| fundamental analyst would calculate a theoretical | | | | main types of investors form the market. A handful |
| value of the company using cash flow analysis, | | | | of stock charting software has this feature of |
| recent dividends and earnings, future dividends and | | | | showing say, the relative strength index for the daily, |
| earnings projections plus a host of other economic | | | | weekly and monthly values on a single screen. |
| numbers. If the current stock price is lower than the | | | | One last point - no single method in technical analysis |
| calculated value, a trader who uses fundamental | | | | is sufficient for real-world investing. For example, |
| analysis would buy this stock. | | | | even if you master Elliott Wave Theory or Gann |
| This writer has the opinion that fundamental analysis | | | | techniques, by itself it would bring more heartache |
| is difficult to master for it to be useful as a | | | | and disappointment. Often, you will need knowledge |
| forecasting tool. Understanding and analyzing balance | | | | from other disciplines and sources to improve your |
| sheets and profit and loss accounts is not enough. | | | | overall investing skills. |
| You will need to analyze the micro and | | | | Some tips for successful investing in stock markets. |
| macroeconomic picture as well. Often you will need | | | | 1. Investing is a business. The rules of running a |
| to be have the same knowledge equivalent to | | | | profitable business are the same as investing in stock |
| senior-management of a company you want to | | | | markets. |
| analyze - minus the leadership and management skills. | | | | 2. Learn to spot your own mistakes fast. When a |
| Take the example of Google's free 2 GB e-mail | | | | mistake is made, exit your position and live to fight |
| service. How much does it cost them? Probably | | | | any day. The faster you realize your own mistake |
| about $2 yearly for each customer. Assuming 100 | | | | and the faster you react will reduce your losses, |
| million internet users sign up, the advertising revenues | | | | hence increasing your chances of winning in the long |
| from this segment alone would provide a tidy profit. | | | | run. A useful method is using a 10% stop loss exit |
| It is the analyst job to provide a good | | | | strategy. If you are long, and your stock price goes |
| educated-guess of this number. More importantly, this | | | | down by 10%, exit. If this same stock reverses and |
| new signings will provide a customer base to | | | | starts to surge, take this as your mistake of not |
| challenge Yahoo and Microsoft. With Google's | | | | identifying a more accurate (lower) entry point. |
| dominance in the search engine market, the data | | | | 3. Understand yourself inside out. What makes you |
| mining of such a huge pool of internet users will | | | | happy, sad, excited, depressed, ecstatic - the whole |
| provide them with an edge in deciding future | | | | spectrum of human emotions are merely states of |
| strategies over its two nearest rivals. Try translating | | | | the mind. This is easier said than done but you have |
| this to what can Google earn in the next two | | | | to keep improving your own control mechanisms. |
| quarters. | | | | 4. Learn the methods of successful fund managers - |
| One of the better tools is the Z-Score, developed by | | | | diversification, emotional detachment and having |
| Edward Altman, a financial economist and professor | | | | realistic expectations. Investing is a marathon not a |
| at New York University's Stern School of Business, in | | | | sprint. |
| 1968 to predict corporate bankruptcies within a | | | | 5. Money management skills. Whether the amount is |
| two-year period. This formula has a 70-plus percent | | | | $10,000 or $10 billion, the same rules apply. There are |
| accuracy rate | | | | plenty of sources of information on this subject from |
| Technical analysis. | | | | the internet. |
| The "price action discounts everything" premise is | | | | 6. Learn technical analysis. |
| central to charting, also known as technical analysis. | | | | The main thrust of this article is to avoid making |
| Technical analysis uses graphic representations for | | | | mistakes that will cost you dearly. How you prepare |
| prices and makes uses of various quantitative | | | | yourself for bear markets, sideways markets and |
| techniques to forecast price trends. | | | | market crashes are vital to your success. |
| A technician makes profits in any market by having | | | | There are no secrets in investing - no magic formula, |
| positions in line with the price trend. When the trend | | | | no discovery of some useful ancient secrets. Just |
| is up, then buy. Conversely, when the trend is down, | | | | knowledge, hard work, common sense and discipline |
| then look to sell. Technical analysis is not an exact | | | | will serve you well in the years ahead. This verse |
| science, but it is easy to learn and effective. | | | | from a 2500-years-old text is a useful reminder: |
| Technical analysis is a good starting point for | | | | "Those who know do not speak, |
| beginners. The foundation should include classical | | | | Those who speak do not know." |
| technical analysis, Japanese candlesticks, trendlines, | | | | - Tao Te Ching, 56th verse |
| RSI, MACD, ADX, stochastics and moving averages. | | | | Stan Seecrets' Postulate: "There are two types of |
| Learners can complete these core topics within three | | | | people in the world - those who know what they |
| to six months. With constant practice, you should be | | | | don't know and those who don't know what they |
| able to independently analyze and identify the current | | | | don't know." |
| trends in the stock market. | | | | You may freely reprint this article provided you |
| Most users of stock charts may only focus on daily | | | | publish it in its entirety, including the author's bio and |
| charts. However, if users pay equal attention to | | | | activating the link to the URL below. |