SHARETIPSINFO >> Articles Directory >>Do trading is all about speculation, is that?


There is a common notion about stock market that speculation of the stock price is the last word for investing in stocks. But that is not the reality. The very word “speculation” hints at assumption of the stock price. In reality there are so many calculations that go into the speculation that it can hardly be termed as a speculation. So if you are new to stock market investment and stock trading, do not take speculation to come from the blue. There are experts who carry out complex calculations to speculate the future of the market and certain stocks. Even with little observation and by following some basic rules you also can do the right speculation. You need not be an expert or have years of experience to speculate the future of the stocks. Rather a little careful scrutiny of the stocks and good reading of the market can help you speculate stock market flawlessly.

For the speculation of the stocks it is always good to concentrate on a few stocks rather than considering the whole stock market. The reason for this is simple, you are not going to invest in all the stocks that are listed at the exchange, and rather you will trade in some selected stocks. There are so many investors who make this mistake of taking the stock market into consideration and they become confused. So the first thing that you need to do is select a few stocks and concentrate on them. That will narrow your focus and let you spend more time in following and analyzing these stocks that will eventually increase your accuracy for speculation of these stocks.

For making the primary selection you should select some sectors or type of business, for example, FMCG, petroleum, retail, etc. You can also make this selection depending on your personal interest as that will keep your more motivated. It is always wise to focus on more than sector as that will diversify your portfolio and reduce the risk of your portfolio. The next step is of course selection of stocks from these sectors. For selecting the stocks you should look for the financial position of the company and for that you have to go through the annual reports and quarterly reports. You should always pick up stocks that have posted high earnings over the past few years, have low debt at the market, have lower P/E ratio and a sound financial position. Market capitalization is another determining factor for choosing the stocks. It is always better to select large cap stocks as these companies are in business for significant period of time and they have made profit steady over the years. But of course there are some mid cap and even small cap stocks that have huge potential.

For rightly speculating the future of the stocks that you have selected you have to consider a few things like the closing price of the stocks for the last few days and the trading volume of the stock. Once you have collected this information you have to do the technical analysis of the price movement for that particular stock. There are so many tools that can make your job of technical analysis of the stocks quite easy. With the software you can get a fair idea of the future price movement for a specific stock. This is done by comparing the present price movement graph with the past movements of that stock. There are so many ways to do the technical analysis like the candle bar method and you can choose the one that is suitable for you. But all these methods are completely dependent on mathematical calculations and hence it is not the speculation but the calculation that rules the stock market.

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