Some information on stock analysis
Stock analysis is one of the tools that an investor can rely on when looking to start trading.
For those of you who don’t know, you’ll find some information in this post pertaining to this analysis.
Hopefully, it’ll be able to help you through your trading journey.
Let’s get to it!
What’s stock analysis?
Stock analysis is a method used by traders and investors to evaluate stocks.
It’s done by analyzing a stock’s past and current data to have an understanding of where it’s going.
By using stock analysis investors are able to decide whether they should buy or sell a stock.
In essence, it gives investors an edge to make important decisions in their portfolios.
Two types of stock analysis
There are two types of stock analysis; fundamental analysis and technical analysis.
each one of them provides different information and they both can be used simultaneously.
1- Fundamental stock analysis
The fundamental stock analysis involves a company’s financial standing, such as its reports.
Looking through these reports they can know whether or not the stock’s price matches its value.
Companies are required to release their financial reports to the public.
From those reports, one can find their financial statements, balance sheets, income statements, and cash flow statement.
If you’re going to conduct a fundamental analysis you’ll definitely need the financial report.
Financial statements: This is a written financial statement created by a company’s management that gives a summary of the financial standing of the business in a specific period of time.
Balance sheet: A balance sheet provides detailed information about a company’s assets, liabilities, and shareholders’ equity.
Income statement: This statement is where you’ll find how much money a company makes within a year.
It also shows the costs or expenses associated with this time period.
Cash flow statement: It’s exactly as its name says. it’s the cash that’s being flown in and out of the company’s account.
Keep in mind that a company always needs cash on hands for expenses.
If you see that there’s barely any cash in the company’s possession, then it’s not a good sign.
2- Technical stock analysis
Technical stock analysis is used on a daily basis by investors.
In my opinion, it’s the easiest and most readily available for stock traders to use.
Technical analysis involves the usage of a stock’s history.
it looks at the stock’s past prices and volumes, as well as its current data.
From there, an investor can have an idea of what to expect in the future.
The following points are very important in technical analysis.
History: Stocks will always repeat their history, that’s something all investors put a strong belief on.
It’s one of the reasons you’ll hear investors saying “Buy the dip” it’s because they believe it will go back up as seen from its history.
Stock charts: One tool that you can’t trade without. It’s where you’ll find most of your information for your technical analysis.
Thus, it becomes crucial that you know how to read and try to understand a stock chart.
Stock volume & price trend: These two factors usually follow a trend.
In other words, there are things that happened in the past that have increased them.
If those specific things were to happen in the future again, there’s a great chance that they will increase again.
Stock analysis is composed of fundamental and technical analysis. They are two main types of analysis that investors use to trade stocks.
Investors use stock analysis so that they can evaluate a company or stock before they invest.
Through this analysis, they can find the value of a company from its data which will help them decide whether to buy or sell.
One thing to note is that they may not always be correct but they do give some good results sometimes.
I hope this post was helpful to you.
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