One question that everyone asks when it comes to intraday trading is which is the best stock to buytoday. You may find a list of such best stocks when your run an online search on best stock to buy.
However, there is no guarantee that you will definitely make a profit if you buy any of the stocks mentioned in the list.
Blindly following stock market recommendations may not be a good idea, especially for a newbie investor. There are mainly two things you need to consider while choosing the best stock to buy: Technical analysis and News Bytes
Technical analysis refers to the process of selecting stocks by analysing statistics related to past market activity, volumes and prices. You will have to go through past charts of prices and the various indicators so as to predict the future movements of the stock price. Many technical analysts provide intraday trading tips based on the trends that are implied by charts, indicators and past data. However, there are times when things do not go as per technical analysis. In such cases using stop-loss orders may help mitigate your losses.
Technical analysis involves a lot of indicators as well as chart patterns and one need to know how to use these in order to pick the right stocks. The approach that should be adopted is more subjective here. Also technical analysis comes with its own set of concepts. The criteria are completely different from that of fundamental analysis. Nevertheless, one would need a lot of discipline and savviness to master technical analysis.
You will have to be aware of the latest news about the stocks on your watch list if you want to make the right decision on the best stock to buy. Negative news such as bad earnings report, political or economic uncertainty, poor corporate governance or any unfortunate occurrences might cause people to sell stocks. On the other hand, any positive news including good earnings report, new products, acquisitions, positive political or economic indicators or increased corporate governance can lead to buying pressure, making people buy stocks.
As per some of the best stock choosing tips, it is important to make sure the news is unexpected while using news bytes to pick the best stock to buy. Expected news may not drive prices the way unexpected news do. For instance, if a certain company makes better-than-expected profits, there are chances that the stock prices might jump. However, if these profits were expected by most of the investors, there may not be much change in the price.
Technicals or news associated with stocks change every day. Therefore, it is important to create a fresh watch list every day for stocks that are in trend. This applies to you even if you are going by the share market recommendations.
Once you have decided your method of choosing the best stock to buy, you will have to complete three tasks:
Scanning and Selecting
With so many stocks out there it might get difficult to find the interesting ones that are making new highs, breaking out of old trading ranges or having pivotal crossovers. This is where scan engines may help. They allow you to sift through the list of stocks and spot golden opportunities that you would have otherwise missed. If you can figure out the right way to use the scan engines, you can make some of the most profitable trading decisions ever.
Identifying the right trend
Picking the right stocks to trade is not about following the best stock choosing tips. It is more about identifying the trends of the stocks. Take a look at the historical price movement data of the stock plotted on the two-dimensional chart. Focus on the opening, high, low, as well as the closing price to find out if the stock is taking an upward or a downward trend. You have to consider both volume and volatility here.
Estimating the entry price, target and stop loss
While entry price and target depend on your budget and risk appetite, stop loss is something you can fix in a standard way. Stop loss is generally fixed between 1.5 and 2%. So if the stock price falls below 1.5 or 2% of its purchase price you will have to sell it. There are traders who fix their stop loss points at one third of the expected profit.
The above intraday trading tips should help in choosing the best stock to buy. Your next step should be to find out how to do a technical analysis so that you can become a pro at stock trading. Here is wishing you all the very best.