Your Questions About How To Pick Stocks To Trade

Donna asks…

how do i learn how to read the stock trade?

is there a basic site with
dick and jane steps on how i can read the stocks so i know the basics?

I really just want to transcribe it.

If there was some sort of a diagram even that showed me what each “mark” meant i could probably pick it up.

John answers:


Chris asks…

How to Pick a good Mutual Fund?

If I invest in a mutual fund then what is the average return I should be looking for? 10%?

and how profitable can mutual funds be.. could i swing trade them like a regular stock?

How do you pick a good mutual fund.. should you research all compaines within the mutual fund or is there a different way to assess these from regular stock?

I have a good idea about how to analysis stock, I’m definitely new tho and i’d like to learn how to trade mutual funds…

Thank you!

John answers:

The two most important items I look for are the management fees (lower is better) and how the fund performed relative to the index in a down market (like in 2008). Also, instead of looking at cumulative returns (as the companies like to advertise), look at the returns in individual year during the history of the fund.

The problem is that past returns are not indicative of the future, and a good fund manager may move to another company. Therefore, you may as well buy no-load, low-fee index funds from a company like Vanguard. You will at least be closely tracking the market without paying outrageous fees.

Carol asks…

How are stock trades made?

When I email my stock picks to my brokerage firm is it done by computer or does that company actually have to have a trader on the floor of the N.Y. Stock exchange or Nasdaq?

John answers:

It depends on the exchange. NYSE, AMEX are auction oriented markets that have specalists for each stock. The specalist (market maker) ensures the market for that stock by buying and selling when no one else is available. The NASDAQ is part of the OTC market which is dealer based ~10 stocks to a dealer. The dealer buys and sells the stock and make money on the spread.

Linda asks…

Improving Stock Purchasing Skills?

I’ve been doing fantasy stock trading now for about two years, in order to get better at it for when I have real money to invest. I try to focus on mid term trading (3 months – 2 years of holding the stock). I know the basics of stock trading. The problem I’m having though is that I always end up picking the wrong ones, and if I were using real money, I would have probably gone broke about 20 times by now.

So, anyone have any ideas on how to get better at picking stocks?

John answers:

You didn’t say how your were “picking” stocks but if they have been going down, you definetly not picking them properly ot at the right time.
One of the basic rules, especially investing short term, is you never buy against the trend. If the stock is trending down, you don;t buy., A company can have the greatest fundamentals in the world but if it;s in a down trend you will loose

Before any trades/invests they must have 4 important items in place before they enter their first order
1 – A written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself.
2 – Sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you trade/invest.
3 – A written money management program in place.
4 – A full and complete understanding of the rules & regulations of the industry.
Since you didn’t provide your criteria for selecting investments here are some rules you could follow

The first and primary rule should be never enter into a trade without knowing when and where you’re going to close the trade.

Never invest on emotions; feelings have no place in determining investments.

Only buy stocks with real sales and real earnings, does not apply to pennystocks since they are crap shoots and are traded as fun things and not as investments.

Only consider buying stocks with each of the last three years’ earnings up 25%+, return on equity of 17%+ and recent earnings and sales accelerating.
Avoid cheap stocks, buy only higher quality stocks selling $10 a share and higher.

Never buy if the firm is filing or in bankruptcy.

Learn how to use charts to see sound bases and exact buy points.

Stay with up trending stocks, never buy on down trends. This does mean “the trend is your friend”.

Always buy companies with new ideas, styles or products.

Cut every loss when it’s 8% below your cost. Make no exceptions so you can always avoid huge, damaging losses. You can always average “up”..

Follow selling rules on when to sell and take profit on the way up.

Never average down

Always sell when management cuts sales or earnings forecasts

Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five or more days of volume distribution.

Pick companies with management ownership of stock.

Select stocks with increasing institutional sponsorship in recent quarters.

Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock’s industry

Don’t buy because of dividends or P-E ratios.

David asks…

what online trading course do you suggest i take?

I want to learn how to pick stocks using fundamental and technical analysis.

John answers:

The most complete book I’ve ever seen for investors is “Standard and Poor’s Guide to Money and Investing”.

See if S & P offers an online tutorial.

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