How do I pick a stock?
I am a careful beginner investor and I've got to admit, it is quite a complicated question. It depends on whether a short or long term play, long or short position.
For long term long positions, I prefer the stock to have a nice looking graph, similar to $SPDR S&P 500 ETF(SPY.US$ or $Nasdaq(NDAQ.US$. In the short term, you won't make alot, but over the long term, you'll have more green days than red days that add up to good gains. A nice looking graph is the first criteria, but price can be deceiving. I also look at net income (has to be consistently positive) and market cap (has to be big). This tells me that the company is consistently stable and has a healthy cash flow.
I won't talk about long term short positions because I think it's very rare for anyone to do that and I'm not Burry.
But I do play in short term short positions. I look for stocks with explosive growth (20%++) as I believe that such explosive growth cannot sustain itself, and there is a high chance of pullback in the short term. I especially like stocks that are around $100 such as $Affirm Holdings(AFRM.US$, as there is a lot of room for it to drop and for me to profit. The stock must also also have options trading. I do not fancy getting short squeezed or being trapped by a bad short position, so I prefer to buy puts for my short position. Furthermore, stocks around the $100 range have affordable puts, so if I were to make a bad bet against the stock, it wouldn't be a big loss.
Happy investing, everyone! Remember to stay diversified.
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jo100 : Well Said
rabitter : You inspired me!I don't quite understand how the stock market works,Can you analyze it?
Supperb Daddy : Honestly, I m very new to the market. I Don’t understand what is short Position or long position
Anyway it’s a good read and knowledge for me. Thanks you very much. Cheers
des10OP rabitter: hi, sorry for the late reply and thanks for your kind words. I don't do any technical analysis, and don't know how to read graph patterns (cup and handle, double bottom, etc). I think it might be good to learn graph patterns to see whether a stock is uptrend or downtrend. But I haven't gotten to it yet and still go by my gut feeling and being careful when I take a position. Don't jump straight into any stock with a large sum of money. If you like the stock, buy bit by bit. It is called dollar-cost averaging (DCA) which lowers your risk of buying into a stock at a peak price.
des10OP Supperb Daddy: hi, thanks for reading my post. A long position means you think the stock is going to rise and you buy it. A short position means you think the stock is going to fall, so you sell it.
If you don't own the stock and sell it, it is called short selling. This has a very high risk because we don't know if the stock price will rise by alot unexpectedly. Then, the short seller will have to buy back this stock at very high prices and make a loss.
So if I have a feeling that a stock is going to fall in price, I will buy a put option if it is affordable. And that is called a short position, because I profit if the stock price falls.
Good luck!
Supperb Daddy : Great relaxation. Got it clearly. Best of luck everyone. Cheers
