Intially when I started trading, I use to buy/sell stocks based on news, broker tips or based on top movers for the day. Soon I realised that you can make money this way sometimes but most of the times you will loose. Here are few reason:
- Tip from a news paper: By the time the news comes out in news paper, the stock has already priced in the good news. So it is already late as you have missed the rally. Sometime it may rally a bit as most novice traders will try to buy the share based on the tip.
- Broker recommendation: By the time brokers recommendations comes out into the publc domain, large institutions have already bought their share. So again the news is already priced in.
- Top movers of the day: Again the shares have already rallied by the time you look at your favourite website for topmovers. Ideally you should have bought this share a day before.
This is where methods comes into rescue. If you have right methods and sound principles, you will be able to pick up share before they make a major move and catch them on the way up.
Some of the principles I use or am learning are
- Double Trouble : This scans for shares which have doubled in last one year and have a potential of further growth. The scan along with any latest news like earnings or new contract gives you a narrow list of stock. Not all the stocks in this list rally but chances are high.
- Virgin: This scans for shares which have been neglected since thier IPO.
You can find more information on above scans at www.stockbee.net or stockbee.blogspot.com
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