Line Stock, Tips For Investing Stock As A Beginner: Hey guys today I am sharing some useful information about investing stocks as a starter. Understanding stock charts is the first step toward success in stock picking. Here’s a beginner’s guide to reading a stock chart.
The following article describes a method for selecting individual stocks. If you are a new investor, we recommend that you begin by investing in index funds or mutual funds. This will diversify your portfolio and reduce risk as you learn more about the stock market.
If you decide for investing in individual stocks, this article will teach you how to assess individual companies.
If you’re an experienced investor looking to learn a critical tool for picking individual stocks, keep reading.
Line Stock, Tips For Investing Stock As A Beginner
What Exactly Is Stock Chart, And How Does It Aid In Stock Analysis?
Simply put, a stock chart is graph that shows the price of a stock over a specific time period, such as five years. More advance stock charts will display additional data, and by understanding the fundamentals, you can glean a plenty of information about a stock’s past, present, and future performance.
Google Finance is a great place to look for basic stock information. Yahoo! Finance comes in second place.
Let’s Use Apple As An Example For This Article.
If you are unfamiliar with the ticker symbol, it is the series of letters following the company’s name. It is used to identify the company on the stock exchange.
Things Keep In Mind When Learning How To Read A Stock Chart
Now that you understand what a stock chart is, it’s time to learn how to read one. A stock chart, in its most basic form, is exactly what I said above – a chart with historical prices for a specific stock.
But it became even more valuable when you understand how to read that data and decipher what it means, allowing you to make more accurate predictions about how the stock will perform in the future.
So, in this section, I’ll go over four key data points you should be aware of in order for fully utilize the power of a stock chart. Let’s get started.
Determine The Trend Line
This is the blue line you see whenever a stock is mentioned – it’s either going up or down, right? While the trend line appears to be common sense, there are a few points I’d like to highlight so you can understand it in greater depth.
To begin, understand that stocks will experience massive drops as well as massive gains. Don’t overreact to large drops or large gains, either positively or negatively. You should only use this section of the stock chart to see what’s going on.
In fact, the trend line should encourage you to dig deeper. For example, Apple as a company took off from 2009 to 2012.
But what happened between 2012 and 2013? The stock began to fall – at one point, shares were down more than 40%!
This is where your trend line can help you. News comes and goes, but when it coincides with a dramatic shift in the trend line, it is worth noting.
If you witnessed something similar, I would strongly advise you to investigate what is going on with the company. Most strong companies can recover from such blows, but not all.
For those who are unaware, Apple underwent a few major changes around this time:
For starters, its longtime CEO, Steve Jobs, has resigned (2011). Also, around 2012, Apple noticed that, despite a growing smartphone market, their profit margins were significantly decreasing.
Finally, they were attempting to expand the smartphone into developing countries where it was simply too expensive to compete.
These factors, along with a cut down of others, all contributed to the stock’s decline.
However, new CEO Tim Cook made some strategic moves with the company to turn it around, as evidenced by the rest of the trend line.
The lesson here is to use your trend line as a high-level indicator of something to look into at first glance.
Look For Lines Of Support And Opposition
The next thing to consider are the lines of resistance and support.
These are the levels that the stock maintains over a given time period. A level of support is pricing that a stock is unlikely to fall below, whereas a level of resistance is one that the stock is unlikely to rise above.
That is, until a significant change occurs, such as a decrease in profit margin.
Consider these lines to be bumpers at a bowling alley. The ball bounces back and forth between these inflated barriers when you bowl.
Within these lines of support and resistance, the price of a stock does the same thing.
Knowing where the resistance lines are can help you decide when to buy or sell a stock. However, keep in mind that it is subjective and will not provide you with a clear road map on what to do. You must apply some of your own analysis and judgement.
Be Aware Of Dividends And Stock Splits
You can see if and when the company paid a dividend, as well as if a stock split occurred:
A dividend is declared when a company (via its board of directors) decides to return a portion of its earnings to its shareholders. You get a small portion of the profit if you own the stock.
Some businesses pay dividends, while others do not. Just because a company pays or does not pay a dividend does not mean it is unworthy of investment. There are numerous other variables to consider.
Some businesses simply prefer to focus on growth, so they reinvest their profits rather than returning them to shareholders. Other companies, such as Apple, can pay dividends while still growing.
As shown in the image, Apple began paying quarterly dividends to its shareholders in the middle of 2012.
In 2014, there was also a stock split, as can be seen. A stock split is a strategic move made by the board of directors of a company for issuing more shares of stock to the public.
In this case, Apple performed a seven-to-one stock split which means that for every share of AAPL you owned prior to the split, you now own seven. So, if you had 100 shares of APPL before the split, you would now have 700.
The company’s value does not change, but the share price may. Companies will frequently do this if the price is not competitive or to attract smaller investors (if the share price decreases).
The uptick in trend line after the splitting is also visible. When a stock split occurs, more people invest (due to the lower share price), which increase demand and many cases has the overall share price.
Recognize Previous Trading Volumes
Many small, vertical lines can be seen at the very bottom of the chart. This is a trend in the volume of the stock’s trading.
Volumes are useful to know, but they should not be your only deciding factor when purchasing a stock. When a company receives major news (good or bad), trading volumes typically increase.
Don’t always assume that there will be a correlation between stock price and trading volume, but before making a decision, it’s a good idea to know what the volumes have been in the past and what they are now.
When there are a lot of people buying or selling, it’s easier to find a buyer or seller. If there are a lot of people trading the stock on that particular day, you should able for buying or sell it quickly.