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Should I trade in that stock? – This is a common dilemma amongst the stock market investors, especially if the trader is dependent on the stock market tips. If this is the case with you as well and you too can not decide whether to invest in a certain stock you need to know the basic points for selecting the stocks for investment. Here we are presenting some of the elementary but effective tips for selecting profitable stocks that are worth investing.

The first thing that you need to make sure before investing a stock is that the company is fundamentally strong. The financial position of the company, asset of the company, the earning of the company and debt of the company in the market – all these factors need to be carefully considered before taking any investment decisions. You can have all these information if you follow the annual and quarterly reports that are published by the companies. These reports will definitely give you a comprehensive idea of the financial standing of the company. You should always invest in a company that is financial sound and have good prospect in the future.

But always remember that promise of doing good in the future can not be the only reason for investing in the stock. It is the present position of the stock in the market that should always trigger you investment decisions. The price of the stock, trading volume should be carefully judged to determine whether the stock is in demand or not. If the stock is not in demand and traded in low volume and the price in not showing desired movements then you should never invest in the stock.

Then there are other parameters that indicate if the stock is profitable or not. The average P/E ratio is one of those parameters. The average P/E ratio is calculated on the price per outstanding share and it indicates if the stock is rightly priced or overpriced. If the calculations show that the stock is already overpriced then you should avoid investing that particular stock, otherwise if the stock is rightly priced you can invest in that stock.

There are is another way to speculate the price of the stock. You can collect the information of the price movement and the trading volume of the stock and then you can take help of the software tools that can technically analyze the price movement of the stock and speculate the future movement of the stock. If the result of the technical analysis shows that the stock is still at a level that you can buy the stock you can surely shed the dilemma and invest in the stock.

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