Unless you are able to develop a considerable trading edge over the other traders, you will end up losing your money, even if you are disciplined and organized. In this article, I discuss some elements that I use in my trading edge.
Fundamental Analysis
Fundamental analysis is the process of evaluating the financial condition of a company using financial reports, price/earning ratios, revenues, market share, sales and growth, etc. This type of analysis can be time consuming so instead of going through pages of financial reports, I simply look at IBD ratings.
I like to use Investors Business Daily (IBD found at investors.com) to get a quick overview of a stock. The IBD rating covers:
1 – Earnings Per Share (EPS) rating: tells me a stocks average short term (recent quarters) and long term (last three years) earning growth rate. The number I see is how the company compares to all other companies. The scale runs from 1 to 99, 99 being the best.
2 – Relative Price Strength (RS) Rating: Measures a stocks relative price change in the last 12 months in comparison to all other equities. The scale runs from 1 to 99, 99 being the best....
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