The Knack to Know the Stocks to Buy

Buying the right stocks at the right time is absolutely critical to make it as a stockbroker. Brokers need to know they are investing their clients’ money in the right stocks that’s going to get them a return. The problem is that stocks can be unpredictable, so there’s no guarantee any stock will be profitable or turn a loss.

  • How do you know which stocks to buy?
  • Which one favours another?
  • When is the price too high to profit from?

Knowing what makes a stock good, is how you manage your risk. Low risk translates to high rewards.

The Knack to Know the Stocks to Buy

It’s the motto for brokers, and there’s a difference between minimizing risk to damage control. Analysis minimizes your risk, so to become a stockbroker, you need to be able to analyse data effectively. Panic with a downward trade, throwing your accounts into losses, and you’ll soon find yourself in damage control mode, trying to patch up the wounds, inflicted on your accounts. T

he following covers what brokers need to do to minimize risk and avoid damage control territory.

4 Things to know to pick a winning stock

1)     Chart analysis

Chart analysis is how stockbrokers get to understand the stocks. They indicate everything a broker needs to know, to place the trade, or walk away. When analysing charts, it’s about being able to predict what the market shift is going to be.

In stock charts, brokers are dealing with odds and probabilities and there’s no certainty to what will happen. Being able to pick the winning stock though is done through thorough chart analysis, based on the historical data.

2)     Moving averages

Moving averages show the price fluctuation of a stock. Ideal stocks will be relatively steady. No sharp spikes and sudden drops, which can be indicative of insecurities. Brokering is the art of securing stocks at a good price, so avoidance of insecurities is essential. These are avoided through…

3)     Comparison of the movements

Historical data will tell a broker a lot and they will use different measures of analysis based on their style of trading.

  • Day traders may compare a 20-day average movement
  • Short-term traders may opt for 50-day average movement analysis
  • Long-term traders will go back even further to perhaps a 250-day analysis of the movement average

Knowing the trends of a stock is the only way that brokers can know about the…

4)     Stock stability

This is viewed in the pricing. If a stock peeks on a Friday, with a sudden drop on the Monday, then it could be seen as being volatile. Volatile stocks will be high risk, and often avoided. The much safer approach is to see a price that sits on a base line, no spikes or sudden drops, but currently seeing steady growth. Say for example a day trader is measuring a 20-day movement average, sees it’s been steady and the chart shows that the past week, it’s steadily climbed and is now showing on the chart at a 35-40 degree angle.

The stock’s on an uptrend. Up trends affect the pricing of a stock. The more interest there is, the higher the price goes. Brokers need to place the trade, before the price point peeks at an all time high, so they can sell out and retain the profit.

Successful stockbrokers will be able to carry out chart analysis thoroughly, using historical data to best predict what the future stock movement will be.