How To Articles
How to choose stocks for trading?
- by Anna K.
Stock trading is one of the most interesting types of trading. In the process one gets to follow their favorite companies, read a lot of news and get finance-savvy. It is also one of the best ways to understand the financial picture in the world as well as learn to predict the movements of the market. On the example of a single company one can learn how different processes influence their stocks and market caps. But there is a process of a choice before a particular stock is selected. And with the present variety in the markets the process of choosing can take a lot of time. So, how does one choose stocks for trading?
First step is to look at liquidity of the stock. Liquid stocks tend to have bid volume. On practice that means that the purchase of big quantity of the stock will not harshly influence the prices of the shares and big sell-offs will not put exchanges in panic. Big volume also means that the process of buying and selling will not be hard. Also, big profits usually come with selling or buying a large number of a certain asset.
Volatility is up for the second look. With trading the key to make money is the movement of the price for a certain financial instrument. It is important to learn the average movements of the stock per day in order to understand what percentage is usually gained or lost by the asset during the day. It is good if the stock averagely moves by 3-4 percent per day. This would be an indicator that there is good movement of the capital going on around the stock.
The amount of people trading with the asset of your choice can also be a very good indicator. People tend to feel better when they are doing the same thing others are doing. A large amount of people behind a certain asset also shows that the fellow traders have a lot of faith in the asset. And if the stock feels support, they tend to go up and bring profit to both, traders and investors. That of course brings us to the point, that is better now to trade with the shares of the companies, which are well-known round the globe. Global name for the company is the indicator that a lot of people would be interested in supporting the shapes on the high level including even, the governments of certain countries (e.g. Norway invested in Tesla).
Of course, these are only the suggestions on how to choose stock for trading. There a lot more professional rules and general guidelines on the process. Of course, there is nothing more sure than to consult with professional traders and brokers on the question. We also want to remind you that losing is an essential part of trading along with winning. It also impossible to be constantly winning in the present situation in the markets. But It doesn’t mean just stop trying – on the contrary, try harder and it is possible to just find the right asset for profitable trades.