Before we are going to do something our mind will frequently ask how? This same question will also come to every intraday traders mind while they enter into NSE market. How to select best performing stocks? Selection of stock is the first step for the success of trading because it is just like we make the strong foundation to build a house. How much the foundation is strong that much the house becomes stable. When you enter into stock market you are trying to build your future investment over these particular stocks that you were chosen. As a trader you may know why the selection of stock is important in trading. There are more than thousand stocks, from that which one will you choose for a profitable trading. It is very difficult to say because it is not a single step process. It is a systematic process. So you should take many factors into considerations at the time of stock selection.
Before you going to select a stock definitely analyze these factors
Scanning and searching all stocks and select particular one is time consuming and tedious process for all traders. Some of them depending on certain criteria based on technical parameters or indictors. Actually they are wasting their time in front of computer by analyzing each indicator like MACAD, RSI, moving averages, Fibonacci and Gann calculations etc instead of analyzing the stock. But for a trader it is very necessary to know all the technical concepts and go through it. Even though screen hundreds of stocks against these indicators itself becomes herculean task. So before you select the stock you need to make perfect analyze through the following factors.
- Liquidity of a stock
- Volatile Stocks
- Correlation Stocks
- Trend of the market
- Reputation of the company
Let’s see how these above factors help you to select a good stock as well as familiarize the manner you have to analyze these factors to get a good stock.
Select the stock with high liquidity gives you high return
If you are a day trader don’t forget to analyze the liquidity of your stock. Analyzing the liquidity of a stock is the right way to choose good stock. Because a trader can purchase large quantities and sold out a stock easily if the stock have high liquidity. Liquidity of stock is directly proportional to the volume of stock. This is the logic behind selecting high liquidity stock.
Traders who select less liquid stock never have an opportunity to trade over large quantities because of the unavailability of large amount of buyers. Traders may argue that the liquid stocks gives some traders may argue that liquid stocks offer better opportunities with quick price variation while the static shows that volatile stock shows greater movement in a short period of time. Therefore, the majority of possible gains may disappear while the downside risk still appear. Nevertheless, the quality of trades placed by the traders influence stocks liquidity. For example, if the trade is for 50 or 100 Rs. it is enough to have a volume of 50,000 to 75,000 shares. However, when trade for high price significantly larger volume is required.
Keep a distance from volatile stocks lads you to risk less trade.
Volatility in stock market is arguably one of the most misunderstood concepts in investing. Volatility is the amount of price change within a given period of time low volatile stocks has a tendency to undergo unexpected movements. It will show rapid grow and fall. The traders who select the volatile stock will experience the pain of loss than the joy of gain. Volatile stock is very risky to trade. Risk is helpful as well harmful. Lower the volatility lower is the risk. The best way to select the good stock is to avoid the volatile stock from your list.
Trade in Good Correlation Stocks always helps you to hit profit
Among these thousands of stocks some of them are highly correlated. Selection of stock with high correlation with major sectors and indices is best ever tipped for day traders. Because when the sector or index moves in upward direction the price of the stock also will arise. Stocks that move with respect to the reaction of the group are dependable and frequently follow the predictable movement of the sector. All information technology companies dependent on the US markets so that increase of the Indian Rupee against the Dollar will normally influence these companies. If rupee is stronger which implies lower earnings for the IT companies and weakening rupee implies higher export incomes for IT companies. So select the stocks with related each other. If one has a tendency to move up obviously other also go in the same direction. For a trader it will be profitable trade for trading the correlated stock.
Follow the Trend and track your profit
Day trading is not possible without following trend of the market. You should have a clear idea about the movement of the trend of the market. Trend analysis is an aspect of technical analysis which will help you to predict next moment of a stock on the basis of back data. Which means trend analysis is a technique made by the conclusion of what happened in the past and what will happen in the future. If a trader will follow the trend of the stock is able to select early a stock which will move up and make profit. At the same time they will be able to find the stock that are likely to decline. It is a very advantage for each trader while they select their stock.
A highly reputed company will able to give the expected income for each employee.
Buy the stock of a reputed company with reasonable prize.
Yes it s exactly right only a good reputed company can give enough income and security for their employee. So believing non progressive company is not good for the employee. Same thing we have to check while you select a stock. The stock of week company will never gives the expected income. So try to invest the stock of reputed company. There is a trend to buy the stock on the basis of prize. Yes price is really an important factor for each investor. But if you only look at the prize of the stock you may forced to buy the stock of bad company at low cost. There is no benefit for you. It will cause to loss the money and your investment time everything within a minute. While you buy the stock of reputed company in sufficient price will help you to save your money as well as increase your money. Don’t buy the stock of a bad company in cheap rate.
Selecting a stock is not a difficulty but if you not follow the correct criteria you may fall down. Because you are selecting a stock not only for a temporary. When you select the stock you start o invest your hard earned money on that particular stock. If the stock will goes down you will face a huge loss. We can never predict what will happen on next day. It is better to take precaution before something happen against our expectation. For that we need to analyze the stock in the above manner.
Read the following blogs for a good NSE trading
- RISK AND BENEFITS OF NSE TRADING
- MAKE A VISION TO ACHIEVE PEAKS
- HOW TO GET THE RIGHT INFORMATION ON STOCK MARKETS FROM CANDLECHART AUTO BUY SELL SIGNAL SOFTWARE
- VOLATILE MARKET TRADING TRICKS FROM CANDLE CHART AUTOMATIC BUY SELL SIGNAL SOFTWARE