MAKE SURE YOU ANALYSE YOUR COMPANY WELL BEFORE YOU ENTER A TRADE
Success in trading and investing comes from doing your own homework or research. Many investors do not do any research and simply trade by reading others stock recommendation lists. These lists can come from a variety of different sources e.g. trading companies or analysts.
For me the worst thing that can happen on a stock that I am trading or invested in is that it is upgraded or downgraded by an analyst. Many traders will enter the trade just because it has been upgraded or downgraded but bear in mind an analyst will upgrade and downgrade stocks based on their research and hopefully it is unbiased – but is it? Brokers or banks and even companies pay analysts to do the research but also have a trading team on the other end of the firm. Legally they are supposed to be separated by a ‘Chinese wall’ to prevent any insider trading. However sometimes I do wonder about the timing of why an analyst will upgrade or downgrade the stock.
A good example occurred at the beginning of the year, on the 12th of January RBS gave instructions to all their clients – ‘sell everything ahead of a stock market crash’, warning of a cataclysmic year ahead. Had you taken their advice then you would have missed the rally that ensued. This is why it is imperative to do your own research and come to your own opinion/conclusions on stocks and the markets. Warren Buffet, the ‘Oracle of Omaha’, is not based in New York but in Omaha so that he is away from all the noise in New York, he can and does come to his own conclusions based on his research.
VALUE LINE IS A GOOD SOURCE FOR UNBIASED INFORMATION
Research alone will not prevent you from losing capital as you must ensure you protect your profit and capital but it will give you a higher probability of success in trading. Your next question would be ‘how much research do I need to do and where do I get unbiased information?’ The rule of thumb is to do at least one hour a week on every position you own. I use Value Line for my unbiased fundamental Data. Value Line has been around since 1931 and they provide fundamental data on stocks, they do not have a trading side to their firm. Value Line is paid by their subscribers allowing them to give their opinion without any retribution from the companies they analyse. Value Line provides you with raw fundamental data, using this data and a proprietary system (Trillium Trading Academy Triple A Analysis) gives me the necessary information I require to conclude if the company is fundamentally sound or not. Thus before you start trading someone else’s stock list do your own homework to see if a company is good or not and you will be rewarded for your work.
In our two days Swing Trading Seminar you will learn how to evaluate a company and use the Value Line reports.