How to enhance your stock picking knowledge

Few individual investors have the time, patience or requisite knowledge or stock market tools to perform the kind of detailed stock analysis and research utilized by leading Wall Street firms. For individuals looking for insight into market leading stocks and winning stock ideas, the following approach has proven to be a fast, efficient and free way to see where the smart money is investing and to enhance your knowledge before making a specific stock trade. This article is not designed to be a comprehensive methodology for trading stocks. Rather it is intended to provide information about valuable free tools and research that may aid in one's overall investing process.

Instructions

Difficulty: Challenging

Things You’ll Need:

• Subscription to Investors Business Daily
• Access to the internet
• Cable or satellite television
• DVR (e.g. Tivo) optional

1. Subscribe to Investors Business Daily which is an excellent resource for specific stock and trading data, charts and tools (website). It's a quick read and can be read in less than 20-30 minutes each day. Unlike more news driven publications like the Wall Street Journal, Investors Business Daily is more focused on trading data, charts, and unique snap shots into the market. You should receive one of William O'Neill's investing books when you order it, which all basically cover the same topics. Become familiar with the CAN-SLIM process and learn how to reference the key charts and metrics provided in this daily publication. The online "Stock Checkup" tool is invaluable at providing an easy A+ through F grading system to combine all CAN-SLIM metrics into one ranking. Follow the 20 Rules of For Stock Market success. Learn the basics of reading stock charts.
2. Watch or record Fast Money and Jim Cramer's Mad Money show on CNBC. Irrespective of whether or not you agree with either of these shows commentary or expert opinions, this will help you understand what news is driving the market; what traders are doing; what momentum traders will be doing (and what you may want to avoid) and provide you with a good stock market knowledge of what stocks may be in play and on the move.
3. Leverage the knowledge and experience of those who know a stock or industry better than you and who may have more experience tracking the stock. Read stock message boards. Yahoo has the most complete coverage of stocks. You will encounter a full range of information from worthless and irrelevant to very insightful. Be cautious and patient before acting on any advice or information you find on a message boards. It's about quality of information not quantity. It is best to spend time on the board to understand what posters are respected and which ones have a track record of being accurate or insightful in their predictions or analysis. Over time you should start to see who has real insight into a stock. Do not fall prey to posts by short sellers who often try to create panic by spreading false or misleading information.
4. Now put it all together. Select industries and businesses you understand. Create a watch list of stocks and pay attention to the daily news and other pertinent market data. Set purchase price targets and an exit price goal. Develop a methodology for stock selection and trading that is right for you based on your risk adversity, available funds, financial goals, etc. Before you buy or sell use the tools outlined in this article to help you make a more informed trading decision.

Tips & Warnings

• Request delivery of your Investors Business Daily the evening before the trading day to get a jump on digesting the data and researching winning stocks to trade.
• Buy only stocks that score an A- or better on CAN-SLIM
• Follow the IBD 20 Rules for successful investing
• Watch or record Fast Money and Mad Money as often as possible. As a back up or to save time read the show re-caps on online.