Criteria for Buying Stocks

Criteria for Buying Stocks
By
www.CandlestickForums.com

Investors and traders all have criteria for
buying stock or for selling stock.

Accuracy in setting up such criteria goes
a long way towards success in day
trading and success in long term
investing.

Criteria for buying stocks can be
implemented when an individual stock
attracts the investor’s attention or can

be implemented using computer
software in order to screen an entire
stock market for stocks that fit a
predetermined set of criteria.

The point of using criteria for buying
stocks is to obtain the best return on
investment,

reduce risk to a reasonable degree, and
keep a diversified portfolio, which by
itself is a way of reducing investment
risk as well as increasing returns.

There are a number of ways to set up
stock picking criteria depending upon
how detailed

the investor wishes to be and what his
or her long term investment goals are.

Criteria for buying stocks also applies to
day trading in that the best profits will

often be made on the volatile stocks so
the day trader will often have a different
set of criteria for buying stocks than the
long term investor.

Analysis of market sectors can help
predict where the market will perform
well in the near and long term future.

At the turn of the last century auto
makers did well and carriage makers
went the way of the horse and buggy.

Main frame computer makers lost
business when the desktop computer
came to be and chip speed increased.

A strong understanding of market
sectors helps pick stocks with better
chances of making a profit in the stock
market.

Watching cyclical market sectors that
have bottomed out allows the investor
to pick a stock with a low price to
earnings ratio before the company and
the market sectors turns around.

Fundamental analysis leads to strong
criteria for buying stocks.

This has to do with evaluating the sales,
overhead, past earnings, and market
prospects of a company.

How well is it managed, how effectively
does it bring products on line, is its
pricing effective, and so forth.

This method looks at intrinsic value and
is the basis of value stock investing.

Finding stocks that are selling far below
their intrinsic value is a favorite investing
strategy of many very successful
investors.

Following a company’s earnings per
share divided by its price per
share, another way of saying P/E ratio, is
especially effective in cyclical stocks
when looking for support and resistance
zones in stock trading.

Smart stock investing will always include
criteria for buying stocks.

The manner in which the trader or
investor sets up the criteria will depend
upon long term investment strategy and
short term trading tactics.

Using a stock screener set to the trader’s
personal criteria is an effective way to
see where he or she should be trading
for the day.

Using a stock screener will help the long
term investor find value stocks that will
lead to long term profits.

A computerized stock screener can
select stocks bases upon dozens of
criteria.

This capability is remindful of the “KISS”
method of dealing with issues.

“Keeping it simple, silly,” with no more
than half a dozen criteria is probably a
better way to start for beginning
investing in the stock market.

It is probably also good advice for those
experienced in stock market investments
as well.

Criteria for Buying Stocks

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