Stock Market Research Options
The stock market is a vast arena of information and widely varying strategies. Anyone who participates with stocks understands that decisions are not always easy, and the fluctuations often seem random. While it can take years to become a consistently profitable stock investor or trader, you have some options when making your portfolio choices. Researching the stock market is straightforward, especially with the help of online tools.
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Chart Research
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Most investors do not buy a stock without first consulting its price chart. Nearly all brokers provide free charting software to their clients. You also can consult free online charting services, such as Google Finance or Yahoo Finance. Once you pull up a chart of a stock, you can use an old technique by Charles Dow to analyze its performance: Identify the recent highs and lows on the chart. Look for a pattern of "higher highs and higher lows." This means that the recent highs were each higher than the previous high, and the recent lows were higher than the previous lows. When this pattern appears, the stock is trending. Trends often run indefinitely, leading to higher prices. A stock that is not trending is more volatile. Many traders avoid participation in such a volatile stock.
Earnings Season
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Every quarter, public companies must report on their earnings. Fundamental analysis is the field of researching stocks based on this information. Share prices usually move quickly in reaction to these reports. One way to research earnings is through a financial media website that focuses on fundamental data. The "Earnings Central" section of the CNBC website is one resource that provides information about earnings reports and their effect on share prices.
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Technical Analysis
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Technical analysis is a prominent arm of stock market research, and it is an option for anyone who seriously invests in the market. The field has evolved significantly since the early concepts by Charles Dow. In 2011, traders review many chart patterns in their research, all with the goal of predicting future prices. Each pattern is not difficult to understand, but the challenge is in identifying the pattern in real-time. A common reversal signal is the "head and shoulders" formation. When the middle peak of three consecutive highs is the tallest, with the highs on either side lower, this often signals an imminent turning point in the stock that sends prices much lower. Dozen of patterns like this emerge constantly in the market. Any serious investor should consult these patterns in his research.
Warning
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It is easy to overwhelm yourself with too much information and diverse techniques as you research the stock market. Consider focusing on two research methods first and combining them when looking for stock opportunities. It may be better to master a few techniques than have only cursory knowledge of many. For example, you might identify trending stocks, and then select the tending stocks with strong earnings reports. Over time, you can add to your arsenal of research options.
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