Your Questions About How To Pick Stocks To Buy

Nancy asks…

Once I sign up for an account, will you walk me through how I buy a stock on Scott Trade?

Do I pick a stock and then buy so many shares? I have never bought a stock before. What is the process involved? I was going to sign up with Scott Trade, but the application process requires a credit check. I am not sure I even want to buy a stock. I have a mutual fund with Vangaurd. That process was very simple. Is it the same basic idea when it comes to buying stock? Thank you.

John answers:

Placing trades on-line is very simple almost more simple than buying a mutual fund.

All you need to do is make sure you have the money in the account and know what you would like to buy or sell i.e. If you want Google then you need to know the ticker symbol which you can look up on Yahoo finance and you should get (GOOG). After you know what you want and how much you want to pay for it then you need to determine if you want to fill this trade using a LIMIT ORDER which is an order where you pick the price at which you want to pay and if the market happens to trade at that price then your order should fill at that price. If you want immediate execution then you would want to place a MARKET ORDER which is automatically routed to the market and you will execute the trade at whatever price the market is trading at so if you chose the MARKET ORDER route you have price risk but you will fill your trade.

If you chose Scottrade they have limit/market orders for $7 a trade and Scottrade is very simple to use. I have had an account with them for several years and if you go with them I think you will find their setup very user friendly. Hopefully this was of help and good luck with your trading.

Helen asks…

when you buy the stocks, how~~?

I am wondering when you buy the stocks, how you pick up the good
stocks from your point of view.
I am really interested in choosing the profitable stocks in the future.
why don’t you share your skills or knowledge with me? I like to learn
how you decide to buy the stocks.
have a nice day and enjoy the rest of weekend!!

John answers:

First, the stock must have good fundamentals. For good ideas on searching for stocks with good fundamentals, look at William O’Neil’s book called “How to Make Money in Stocks.” This book combines fundamental analysis and technical analysis and teaches that the best thing to do is to use both strategies together. I am sure, you can find this book in libraries, and you may read it if you are interested.

Next, screen for stocks with good technicals. I use Telechart to screen the 7000+ stocks in the universe, but there are also many good stock screens available online. From there I narrow the selection down to what I call myUniverse of Stocks to approximately 2500. This screen is based on…
Price > $5
90 day Volume > 250,000
Capitalization > $100M

From here I use multiple screens to narrow my selection down to several hundred by choosing for instance…
Relative Strength >70
MoneyStream >70
Profit Margin in the upper 50th percentile
Revenue Growth
Earnings Growth
PEG < 1.5

Once I have my selection I look at the charts for a good buying opportunity…
MACD crossing above the zero line
Stochastics are not overbought
Good Industry in good Sector (Top 20% industries)

After this, your selection is down to a dozen or so, and for these I check the recent news, Schwab ratings, MSN ratings, etc.

Lisa asks…

how to pick online trading company to buy stock online?

John answers:

If you have little to no experiance… Use;

You’ll get the support you need to protect yourself from your own ignorance (which can be very costly).

Scottrade is “OK” (mediocre)… But best suited to somewhat experianced customers.

If you’re very experianced;
Interactive Brokers (little to no support)
Cobra Trading

Paul asks…

I have the gist on how stock works, but what are the best ways to buy indevidual stocks?

For instance, say I want to but fujiya stocks from japan, or even wal-mart stocks. How do I go about it?? I want to do my own research, and pick them myself, but I don’t have $50,000 for stock brokers. VERY small investments?

John answers:

If you love stock trading, look for the price momentum. While all the technical analysis calculation, spot the stock with high probability of increase in price (or decrease if you short).

But if you want longer term stock investing, look for quality stock, claculate its intrinsic value and buy them when the price lower than its margin of safety.

Joseph asks…

how do you buy stocks in the TSX?

hi there,
I’m 16 and would like to buy stocks in the TSX (my dad has no problem with me using his name and stuff), I currently reside in Ontario.

I have several questions, id appreciate an answer to any of these questions.

1) how do you go about picking a stock? Where can you look? I find the tsx website’s information on a company can be vague, it doesn’t even have the p/e ratio!
2) how do you choose a market? when i’m sitting down i just think maybe apple inc is going to go up because its christmas time and people will buy more of their ipods. how do the pros choose a market?
3) can you buy odd lots? could i buy just 5 stocks in a particular company, just to see how they do?
4) is there a forum for beginner-lever individuals interested in stocks?
5) i can save up about $3,500 at best, should that be enough?
6) how do you analyze a company’s real value (such as who makes up their board of directors) ? not just look at their figures? Where do you find such information?
7) how would i analyze the values of companies dealing with minerals?
8) the intelligent investor is the book im currently reading but I find it does not make much sense and i do not find it useful. i just wanted to hear what you guys had to say about that.

if you could refer me to a book or a website (ideally) that could answer said questions, it would be much appreciated.

thanks in advance.

John answers:

Hey there, good job getting into this stuff sooner than later!

First of all, you’re going to need a broker. Try Questrade, they’re good for starters (I’m currently there too), they offer lowest commissions per trade in Canada so far and they’re great for Canadian stocks (they also do American in case you want those later).

1) Try researching and using ‘stock screeners’ at sites like Yahoo! Finance (there’s a .com and a .ca, look around both for a more ‘north american’ approach). Google Finance also works for stock info.
2) Apple Inc is on the NYSE – not the TSX. Choosing markets and stocks depend on your choice of strategy. Stocks are not casinos so you have to go at them with a strategy for profits.
3) You can buy 1 share if you like (as long as the broker has shares of your choice) – limit is yours to call!
4) Forget the forums, there’s too many people out there wanting to take advantage of the young and old (mainly the inexperienced kind). Start out the old fashioned way and learn from books you can get at the store or library (careful with the outdated stuff though). Try Rich Dad, Poor Dad for a good sense of ‘money philosophy’ and something like ‘Technical trading for dummies’. There’s a bunch out there, have a look at what you need. Learn and then figure out a strategy you want to try based on your risk appetite (i.e. How much you’re willing to lose per trade, to make the profit you target)
5)$3,500 is great to start with. You only need $1,000 to start an account (especially at Questrade), banks don’t require a minimum but then again, they charge you a lot of commission and fees! Try not to use up all your savings. Always go invest with the mindset that you have the risk of blowing away all of the money you put in – so it doesn’t kill you while you place trades and get out too soon or too late (ending in losses or small profits)
6) Yahoo! Finance and Google Finance have the (fundamental analysis) information that you’d want if you’re going to ‘invest’ based on how well the company is performing. Which brings me to: you want to evaluate a company’s performance with a bunch of ratios if you’re going to invest. If you’re going to trade (buy shares at high/low price and sell/buy cover at high/low price – see long and short positions definitions).
7) Sorry, don’t know too much about dealing with commodities (i.e. Minerals, copper, gold, livestock, etc.)
8) I haven’t heard or read that book :-).

Word of advice: Never EVER pick a stock based on what people recommend online. Chances are they have a position in that stock and they want you to help move the market with them. As they say around financial forums – ‘always do your DD’ i.e. Due diligence, i.e. Research! 😀

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