There are several approaches to find the best stock trade. Some people go by gut, but the best approach is to do the necessary research. Finding a profitable stock trade always starts with finding the right stock. Although it sounds easy in theory, it is much more difficult than it looks. Searching for the perfect stock to trade can be an exhausting process and investors starting out might find it difficult. You can start by looking at the best stock research websites out there. So we compiled a process for investors to follow so that you can easily identify the best stocks for every trade.
Let’s start with the basics
Find the stock, this is perhaps the most challenging part. With thousands and thousands of stocks to choose from, across global markets, investors can easily get lost. Look for companies that you know already, and that might have a strong cyclical motif behind them. For instance, summer is just around the corner, and BBQs are starting to bring people together. Look for stocks of cooking charcoal, or look for similar trading ideas. There should be a theme and a history behind the stock you pick.
Research the stock
After you have decided on the stock you are going to trade, research the company. Look for news about it, look at the chart. Most importantly make sure you go through the financial reports that can easily give you hints on how the stock might perform. Another important aspect is to look at the earnings date. Let’s use the BBQ example, you could look at when the company is going to release its earnings and position yourself to reap the rewards of the good financial results they might have in the summer.
Place your trade
After you picked your stock and did the necessary research, place your trade. It is important at this point to make sure you followed the two previous steps extensively. The knowledge that you have accumulated in this particular company, will give you enough confidence to put your money where your mouth is.
Check your stock
After all of this is done, you just have to monitor your stock. Check the price, during weekdays, and see if your theory and investment thesis is really working out. Not every trade is a winning trade, but if you put enough time and energy into it, you should come out ahead with plenty of profitable trades.
After practicing this for a while, you are certainly going to run into both profitable and unprofitable trades. This is completely normal, as we are not always right. The best approach is to consistently learn from your mistakes and cut your losses on those losing trades. At the same time, always be sure to book a profit, whenever you can. If you continuously cut your losses and book profits, you will certainly make some profitable trades that can boost your income. Continuously learning and improving your stock research ability is also another important key factor. Always look for ways to improve your trading, and research as much as possible.