When you invest in the stock market, it can be an intimidating experience that feels a lot like gambling. While it may feel like you’re just taking a shot in the dark when you pick stocks, in reality, most professionals have a certain formula or set of steps they follow when they’re making decisions regarding whether to buy, hold or sell.
Some of the top financial and investment professionals in history have even relied on strategies such as astrology to determine stock picks, but if you’re not willing to be that adventurous, the following are some methods to keep in mind if you’re making an investment decision.
Know Your Financial Objectives
Before you can start thinking about the specific stocks you want to trade, it’s important to understand your personal objectives. Are you investing because you want to save for retirement or start earning dividends?
How comfortable are you with risk? Are you willing to take on more risk for the potential of greater returns? What are your personal feelings when it comes to investing?
One of the biggest mistakes a lot of people make when they start trading is not looking at their decisions within the framework of their personal financial goals.
Educate Yourself on Current Events
So much of what happens in the stock market is based on current events. Upward or downward moves may be based on events that never even come to fruition but are so widely discussed in the media that they impact pricing.
It’s a good idea to have a general understanding of what’s happening in the world when you’re making investment decisions. You can let every news story act as a catalyst leading you to buy or sell, but having a general understanding of large events and trends is important.
Read Press Releases
If you’ve ever wondered how financial professionals make their decisions, it often comes down to following what’s happening with individual companies, and anyone can do this. You don’t need to be an expert to gain valuable insight based on information coming straight from companies you’re considering investing in.
If you’re about to make an investment decision, look for recent press releases from companies you’re interested in.
These press releases will often give hard numbers, such as growth and sales, but you can also read between the lines with statements and garner insights about overall strength and any potential instability or shake-ups a company might be experiencing.
Use a Stock Screener
Stock screeners are widely available online, and many investment platforms offer their use to members. A stock screener is a tool that helps people find companies and investment opportunities that meet certain standards and criteria. Essentially, you can input your own set of variables, and a screener will show you matching companies based on your input.
They’re easy to use, and some of the questions that you might be asked in terms of input criteria include whether you prefer large-cap or small-cap options and whether you want companies that are experiencing price highs or lows.
The most successful traders combine a few different elements when making decisions. They’ll look at the fundamentals and current financial components, broad trends impacting the market and the sector, and there’s also usually a bit of intuition and reliance on gut feelings in there as well.