We want to congratulate you. If you have arrived here it is because you have felt the call of the Jedi of the markets and you are at the beginning of a great adventure.
If you are considering investing in stocks, the first thing you need to know is when to buy and sell the stock. This depends on various factors such as the economy, the company’s profits, its operation and the results of other companies in the sector.
What is trading?
Trading consists of buying and selling assets (stocks, currencies, cryptocurrencies, currencies and futures) within a regulated financial market. Its objective is to obtain an economic benefit when the value of the asset fluctuates.
When a person decides to buy a product or service, they usually pay for it. It is different when a person decides to buy a stock. In this case, the person not only invests money in the shares of the company, but also takes the risk that the company will do business successfully or fail and go to the dark side of the markets. Therefore, it is important to know when to buy and sell stocks to minimize risk.
There are two ways to buy and sell shares:
- Short term: This way of operating consists of calculating the probabilities that an asset go up or down of value, and wait for a short period of time for it to reach the price that interests you to buy or sell it.
- Long term: Shares are acquired to receive future benefits. For example, when the company is in a bad economic state, or it is a company with a great projection for the future. As the company is expected to improve, shares are bought thinking that they may be worth more in the future, and then sold.
Our goal as Market Jedi is to buy when stocks are “cheap”. This may be due to large investors dumping their shares, bad news from the company, or an increase in the number of shares. But it is not easy, to discover it you will have to do a good study of the graphs. So don’t jump in without sharpening your lightsaber!
Because the problem is that we tend to think that a low price and a cheap price are the same thing, but this is not the case. Stocks can always go lower or higher than they have ever been.
How to know if the Stock Market is expensive or cheap?
There are tools that you can use to know if the stock is expensive or cheap.
A ratio that measures whether the price is expensive or cheap is the
PER, Price Earnings Ratio
. For example, the average P/E is usually 15 times profit, so a stock with a P/E of less than or equal to 15 shows us that it is a good time to buy.
Another way to calculate when to buy a stock is our safety percentage. For example, if our safety margin
It is 20% according to our investment strategy, and the share is worth €100, the company must trade at €80 for us to come out ahead.
To determine the moment of sale it is essential to have formed a solid strategy, both in case of loss and possible gains. The timeframe will be determined by your trading style and training.
Do you want to improve your operations?
The Download Trading Platforms Masterclasses are taught by leading teachers in Spain who share their knowledge about trading with us to help us improve our operations. With 40 financial training sessions full of educational and human quality, which will help you order and structure the market with a head.
Because to invest in stocks you must keep up with the financial market. Its movements influence the price of shares and if you spot a sudden increase in the price of a share, you would have to check if there are relevant news that explain the increase. If there is no news, it could be market manipulation, and in any case you must be prepared, young Jedi, to face the dangers of the dark side.