How to Research Stock with 2 Free Stock Analysis Methods

How to Research Stock
with 2 Free Stock Analysis Methods

How to Research Stock
2 Most Common School of Thought

Researching stocks can be tedious. To beginners, it can be too tough!

Nevertheless, it needs to be done if you are serious about making fortune in stock market. As starters, there are 2 ways to research for profitable stocks and understanding both is the best thing I'd ever do. Continue reading to get the flavors of each analysis.

How to Research Stock Using Fundamental Analysis

Fundamental analysis is about researching stock's fundamental value. The objective is to discover if the company is able to generate profits in short, medium to long term. You'll be using historical annual reports to research the stock's profitability.

Important key financial ratios will help you to discover if the stock is worth investing.

For example, earnings per share growth rate (EPSGR) indicates how robust the company is in managing business growth, return on equity (ROE) shows you how effective the board of management is in managing shareholders' fund, debt to equity ratio (D/E) suggests how bad the company in leveraging on borrowings, and so on.

Secondly, you have to know on how to value stock and calculate intrinsic value to time the market, meaning, either to buy or sell the stocks. The most common practice is to buy the stock if the share price is within margin of safety (much lower than its intrinsic value) and sell it for profits if the price is way above the intrinsic value.

This is also known as buying undervalued stock and sells when it is overvalued.

How to Research Stock Using Technical Analysis

Technical analysis is focus on market reaction than how the company is doing fundamentally. This method concentrate on how to profit from market behaviour which ultimately driven by human psychology. Theoretically, the share price movement will reflect human behaviour.

Stock trading chart is the greatest source of information to predict on which direction the share price will move.

There are various technical indicators used to discover buy and sell signals. These technical indicators are mathematical calculation that can be applied to market prices. Moving averages, moving average convergence divergence (MACD), relative price index (RSI) and average directional index (ADX) are some of them.
Besides, you can use various stock trading charts to see the patterns.

Line, bar and candlestick chart type is the most widely used. If you find plotting the chart is tedious, you may utilise several stock trading softwares for the same reasons. In fact, there are online stock brokers that provide these tools as part of their services.

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