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Buy the company

Stock market can be irrational in the short term. Good companies, at times make temporary losses. But an investor should not get diverted by this. Companies with real products and real profits do create wealth for their shareholders in the long run. Specifically, look to buy the company that:
  1. Has strong fundamentals, good management and a profitable (or soon to be) business model.
  2. Would be attractive as business owners.
  3. Has obvious long-term potential for good returns, like - has good future plans, decent order book for the future, etc.

We are not dis-heartening the short-term traders or day-traders. These, if planned properly, can make a good living. It is helpful to use a stock screen, a set of criteria you can quickly compare stocks against to see if they meet your requirements. First sit down and come up with a list of your investing objectives; once you have that you should be able to come up with a suitable screen. More on these on some later articles. But a long-term investor must have different strategy, than those by a short-term trader.

A good economically defensive model


An economically defensive model can be of many forms. Basically they give a company a competitive advantage. This includes:
  1. Great management
  2. A strong brand name
  3. Superior technology, etc.
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These are something that helps a company to continue making money throughout a wide range of economic conditions. You will find a plenty of stocks in the market, where they keep on giving good returns, even in the recession times. That's what a good economically defensive model can make to a stock.

Time your investment(s)

While economically defensive model can be the key to picking the right stocks for an investor, but you must know the perfect timing of making that investment. It shouldn't be when the stock is overpriced! That's where few people make a step wrong. There are 3 important things that an investor must try to have: time, independence and effort:
  1. Time

    : Creating wealth takes a good amount of patience to keep your investment on track over the long term. Unfortunately, many investors don't have much time to keep an eye on their investments, or to see how the company is performing over time. So they go making money from short-term trade in the hopes of getting around their lack of time, and fail.
  2. Decision making capability

    : Stock market is volatile. Not always each and every one's advice keeps on working here. Its your money, which you are using. So watch what are the best option in the analysts' eyes. But make your decision independent.
  3. Effort

    : Investing independently requires decent amount of effort to find quality companies. Nothing really comes for free, isn't this? But when you do, it can really pay off.
Your selection criteria for the initial screening should be a few quantifiable measures that you think are the most important for your investing. Here are a few criteria worth considering (and of course there are many others):
  1. Earnings growth
  2. Recent earnings surprises
  3. Price/earnings ratio
  4. Dividends
  5. Market cap or size
  6. Industry
  7. Relative strength

Once you've gathered the facts, you should then perform the analysis to buy the company stock. Different investors use different methods for determining what stocks to buy. Most investors prefer fundamental analysis, although there are also a large number who focus on technical analysis. Whatever one you decide to use, here are a few final considerations to keep in mind:
  1. Focus on the market cap, not the per-share price

    : The market cap is the per-share price times the number of shares outstanding. In essence, this is how much you would have to pay to buy the company. Every company has a different number of shares outstanding, making per-share price comparisons meaningless. For this reason, a stock which is trading at $100 per share might actually be cheaper than a stock trading at $2 per share. This doesn't mean that price per share is completely unimportant; some technical analysts believe it can provide clues to where the stock will go next but for fundamental analysis it's really not important.
  2. There is no perfect stock screen, because every investor is looking for something different. Some are looking for growth, others for value, still others for dividend income. The screens you apply should be done with your unique goals in mind.

Stock market for beginners

Elliott wave

  1. 2652
    The best way to day-trade is the 2652 theory of day trading.
    1. 2652 theory of trading
    2. High low trading
  2. Buy the company
    Stock market can be irrational in short term. Good companies can make temporary losses. But an investor should not get diverted by this.
  3. Contrarian investing
  4. Outperform the market
  5. Day trading guide
  6. Head and shoulders pattern
  7. News trade
  8. Rebate trade
    This is an equity trading style that uses ECN rebates as primary source of profit and revenue.
  9. Scalping trade
  10. Trade systems
  1. Elliott Wave principle
  2. Characteristics of Elliott Wave
    1. Characteristics of Impulse Waves
    2. Characteristics of Corrective Waves
  3. Elliott wave trader
    A few tips that can make the whole process of Elliott Wave trading a lot easier for you.
  4. Impulse Patterns
    1. Impulse Patterns in depth
    2. Profit Taking at the end of Impulse
      After every big rally there is profit booking, the profit money is re-invested into the portfolio, and then the market again starts to climb.
  5. Corrective Pattern
    1. Simple Correction
    2. Complex Correction
      Each segment composed of smaller waves.
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