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Tips For Day Trading
Here are some things to watch for when you're evaluating whether to trade shares of a company.
A couple years back I heard-tell of an easy, at-home way to make money. As a full-time student working a part-time retail gig the idea sounded worth a little exploration. My research brought me to the world of day trading-a lucrative and risky industry where shares of public companies are traded on the stock market. Being a resident of Canada my interests fell on the Canadian and U.S. markets primarily. Two years later I've amassed a wealth of experience and have compiled a series of tips for those wary of getting started. That being said, once you've ventured forth and touched base with a few companies that look attractive to you. The question remains-how can you assess whether the market has accurately portrayed the value of their stock? That is, is the share price indicative of shares actual value? The following should help you narrow down your answer.
1. Evaluate the companies market potential by assessing whether or not they have dynamic products that will not sit stationary in their industry.
2. Does management have ambition? Do not downplay the significance of who's on the Board of Directors. Their attitude and performance will play a direct role in the future of the company and should be indicative of where the company is at present. Read these attitudes and use your conclusions to be reaffirmed or skeptical of the market value price.
3. Determine the size of the company vs. its research department efforts. The size of a company should be directly proportionate to the magnitude of its research department efforts. A solid research department carrying out effective research measures is pivotal to the growth potential of a company. Again, it takes moments to assess the effectiveness of a companies research efforts, yet the weight of this assessment can make or break your investment decisions.
4. Does the company maintain above average sales organization? The structure of a companies sales organization can be another tell-tale sign. It all boils down to how a company makes its sales and the structures they have in place that separate them from the competition. Look for the exceptional here.
5. Does the company have a worthwhile profit margin and what is the company doing to maintain it? The exciting reality is that share price is determined largely based on a companies profit margin. How much money does the company stand to make. Simple as the concept may be the financial 'fodder' you'll have to crawl through to get a basic understanding of what the reality vs. projected reality is may surprise you. Remember. Every company wants to appear profitable. It's up to you to differentiate between those that appear to be and those that really are.
6. What do the labor and executive relations look like? Are they a mess? If so the company most likely is. Look for employee testimonies. The internet has a wealth of blogs/articles etc. written or endorsed by ex-employees who often have a great deal to share about where a company is situated in the industry. Give these the merit they deserve. Keep an eye out for executive relations as well. While executives are often quieter about affairs as they sign the same NDA's as regular employees keep an eye on their public relations. What are they saying to the public about the company? How do these press releases impact the share price? Perhaps they have no effect at all. If that's the case is there a disconnect between the executives and the companies performance?
Undoubtedly after investigating these principles you'll be left wondering a great deal about the company and don't be afraid to spend a good amount of time researching before you take the plunge. Once you have a good understanding of the company, where it's going and perhaps once you've learned how to reasonably predict it's fluctuations start small and intelligently with your investments. Above all be patient and cautious in your movements.
How do you determine where a company is at financially?
Welcome to SEDAR. A registered trade-mark of the Canadian Securities Administrators where you can sift through companies' financial quarterly reports as required of all public companies. SEDAR is one of the quickest ways to watch for new filings, check out companies profiles and search their database of financials. Do not overlook the importance of being thorough in your assessment. Your diligence here will directly influence the success of your portfolio down the road. The link to SEDAR has been included below for your convenience.
Check out SEDAR here.