Stock Trading Style in the Medium Term
The method of trading stocks in the medium term is based on a set of basics that you must do, and now you have everything you need to know.
Medium term trading is a style in which a trader looks to hold a long or short position from one day to a few weeks. If you think that trading stocks in the medium term suits you, then you should do a more in-depth analysis than someone who wants to try investing in long-term stocks or speculating and day trading. The in-depth analysis includes considerations of the historical and expected performance of a short list of companies that you have noted in the pre-list. Below we will provide you with five easy steps that will make medium term stock trading clearer for you.
Stock trading method for the medium term in a few steps
Step one: Look at the stock’s performance history
The first step in choosing stocks for medium-term trading is to collect information about the company’s performance. When making a comparison between the companies included in the short list, you will need to collect information that includes performance and previous earnings reports, and discuss future evaluations and estimates for these companies as well as analysts’ estimates. Looking at the company’s price chart to see if the company’s share price has gone up or down over the past 12 months.
Second Step: Look at the company’s performance
Try to compare the company’s share price with the index listed on it to find out whether the company’s performance is good or below the level of performance of the similar sector or the stock market in general. When collecting information, try to collect data on the company’s last annual earnings report, and the last four quarterly reports with auditing. Looking at the company’s profits, sales, debt, share price-to-earnings ratio, and the profits that the company plans to distribute, with the need to discover if the company’s performance is improving or deteriorating, by comparing the numbers with those of a previous year.
Pay great attention to the company’s expectations for the next quarter and the whole year, to get an idea about the company’s potential future performance, and read the comments issued by the company’s management about the reason behind the company’s quality or poor results and what the company intends to do to correct or improve its performance, read the market risk summaries that The company is currently facing any legal actions related to it.
There is another type of information that you should look at, which is the expectations of the company itself in order to get to know the expected profits and revenues through the company’s issuance of the upcoming earnings statement to take an idea of ​​the company’s confidence in its performance in the future, and this data gives you an idea of ​​the stock price valuation, and the share price moves The company when the actual numbers are published by the company, and if the numbers are good, it is likely to cause the share price to go up, and if the numbers are bad, the share price is likely to fall.
Step Three: Learn about some forecasts of analysts and experts
Analysts’ estimates are also an important piece of information to consider, when it comes to choosing stocks for medium-term trading. It will help you gauge market sentiment, and sometimes the forecasts of well-known analysts may contribute to the valuation of a company’s share price. When looking at analysts’ estimates, it is important to note that caution should be taken as their predictions can be wrong.
Step Four: Make the necessary comparisons
Connect the facts together so that after doing your initial analysis you have the following:
- The performance of the company’s shares over the past 12 months compared to the index on which it is listed
- Information about the company’s profits, sales, share price-to-earnings ratio, and the profits that the company plans to distribute.
- Comparisons between recent trading data and previous periods and forecasts for the coming year
- Future estimates of the company’s earnings, the company’s earnings per share, revenue, descriptive income, and general outlook.
- Information about important upcoming major events of the company that could drive its share price
- Analysts’ expectations of what the company’s performance might be
Step Five: Find out what contributes to raising the share price
Have a look at the company’s share price chart for the past year, re-examine the data you collected and meditate on each time earnings reports were published, predictions were issued, and announcements were made, and note well how far the company’s share price moved and where it was headed at those times, and compare important events In contrast to historical price data, it gives you a time map dating back to the past year, and this can help you build a future map of price movements in the future when similar events occur.
You can also get in-depth knowledge about the reasons for pushing or moving the company’s share price during this period, and after all that you have done, look at the possible scenarios that could occur in the future, as this would make you alert and allow you to respond quickly if these are Results are achieved, questions you must ask yourself, which are manifested in:
Which of the expectations contribute to the valuation of the company’s share price?
What are the most likely outcomes in light of the events or news?
Market potential in share pricing?
What is par for the course?
Answering these questions will help you understand the expectations that drove the price of the company’s stock and help you form a view of the potential for price direction. Once you have completed your analysis of the companies you wish to trade, use technical analysis to find potential entry and exit points using your charting software.
Conclusion
Until now, you have known that trading stocks in the medium term requires a more in-depth analysis, compared to trading stocks in the short term, and there are several stages that must be focused on and scrutinized to achieve the goals of stock trading in the medium term in its correct form.
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