Beginners Stock Trading: How To Choose Profitable Stocks

By: Adam W. Porter Click author's name for more of his/her articles

Picking a good stock is not easy in beginners stock trading. While many joke that the best picks happen when you throw darts at a newspaper’s business section, we all know the process should be more complicated than that. The problem is two-fold:
1. There are a great many factors to consider in picking stocks.
2. There is no ultimate “magic solution” strategy.

Simply stated, there is no single way to choose stocks. That being the case, here are a few of the most common beginners stock trading strategies that people use to pick stocks.
Technical Analysis: Technical analysis is, essentially, the study of a stock’s chart. Pull up a chart, with price action, volume, a few indicators, and begin to look for various clues as to where near-term price targets may be. Evaluate the chart for support and resistance lines, current trends, and patterns. Once you understand charts, this method can be the quickest and easiest path to finding price information for beginners stock trading. It can help you choose entry and exit points, but it is not the entire picture.
Fundamental Analysis: The key to fundamental analysis is to get an idea for a company’s inherent value. It is a simple process, but can take a bit of time. Finding a company’s fundamentals involves researching the company’s management, industry, and financial statements.
Value Investing: One of the best known methods for choosing stocks in beginners stock trading, value investing seeks out a strong company, fundamentally, with a stock price that is below its expected value. The premise is that by investing in a value stock early, the price has room to move up, without overvaluing the company. This method takes a bit of patience, as it may take some time for the price to begin to match the company’s perceived value.
Growth Investing: As a contrast to value investing, growth investing focuses on a company’s future potential, regardless of the current price. A growth stock’s intrinsic value may be lower than its stock price, but as the company grows, its stock price can be expected to grow along with it. Growth companies are commonly found in industries that are expanding quickly, or dealing in new technologies.
CAN SLIM: This powerful stock picking strategy is a hybrid of several methods. Each letter suggests a different element to research, ultimately giving you a complete list of core factors to weigh. This strategy is recommended for beginners stock trading. In order:
C – Current quarterly earnings per share should be up more than 18%.
A – Annual earnings per share should show significant growth over the last five years.
N – New products, management, industry conditions, or price highs are important.
S – Shares outstanding should be reasonable.
L – Leaders should be bought over the market laggards.
I – Institutional sponsorship should be present, with good recent performance.
M – Market condition can trump everything, so take note of the overall current direction of the market.

These stock picking strategies can get very involved, but they are essential for good stock picks in beginners stock trading. There is no sure-fire way to pick a winning stock every time, but these methods will help you weed out the vast majority of losers. Try choosing a few stocks using each of the categories above, to see which method works best. Stick to your favorite method, and your trading will improve!

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About The Author: Adam W. Porter is a successful investor, and has been trading stocks for over a decade. Adam is the owner of PowerfulStockTips.com, where he offers stock tips and advice through a free newsletter. Learn more about Adam and sign up for his newsletter by visiting PowerfulStockTips.com today.