What do we understand by discipline? It means stick to certain rules and guidelines for your goal to be accomplished. In the stock market, either you are a short-term trader or a long-term investor, you must follow trading discipline to achieve your goal. The challenge here for him is to practice these regularly to achieve consistent results.
Novice traders are always in doubt when they try to invest or book profits in the market.
But a skilled trader knows when to buy and when to sell.
In this article, we will try to cover specific guidelines for investing in the market and booking profits.
Know when to invest:
There is no proper guideline and time to consult stock analysts to know when to buy/sell or hold a stock. But there are key facts that can help you to know the market conditions better and a way to identify when to buy or sell stocks. These are
- Increasing sales: Check whether the company is growing its sales and check whether these sales are sustainable or it is just a one-time event.
- Improving margins: Company margins usually improve or worsen depending on how well it is managed. If the sale is going up and also the costs are going up, it means something is going here. Generally, it is not bad news. It might be possible that the company is expanding its business or launching a new product.
- Stocks buyback programs: When a company uses cash to buy its stock, it is good that the management is believing that the stock is undervalued at the current price level.
- Technical Indicators: Along with the fundamentals of the company, technical to play an important role in identifying the stock is in trend or in sideways. Whether the stock price will move up or move down in the near term, can be identified using technical indicators. 50-day and 200-day moving averages help to determine the behavior of stock in the near term to long term.
Know when to book profits: The following situations give hints to investors to book profit or exit from the current positions:
- Company-specific news: There are times when there is company-specific news. For example, some companies developed new technology. In such cases, a lot of people start looking to buy that stock. This demand increase will result in a price rise. At this time, the investment targets of many people are met and they will start booking profit. This will cause a temporary slump in stock due to profit booking.
- Sector Specific news: Same as positive news in a specific company, there can be a piece of positive news for the sector as well. This will increase demands and so rise in price. Some people will start booking profit and cause a temporary slum.
- Economic data: Macroeconomic data also cause people to book profits. In some cases, if future projections are not positive, then it will create a situation to book profits.
I hope, this article helped you to understand the right time to buy and sell stocks. At Pathfinder Trainings, we focus on fundamental and technical analysis of stock and take positions accordingly for a swing or long-term basis.