Posted by forex at 7:56 AM
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1. Appreciate fundamental analysis' basic difference from other systems. There are many methods of day trading stocks, from news playing (making fast, short purchases on stocks in reaction to breaking news) to swing trading (holding stocks for a few weeks to play oscillations in prices). However, fundamental analysis differs from other styles in that you look at a company's underlying financial strengths when determining what to buy.
2. Follow the company's developments, as you would in news playing, but reflect and act on how the news affects the company's worth, not on how it affects trader psychology on an hour-to-hour basis.
3. Learn to read a company's balance sheets. If you want to follow a fundamental analysis approach, you'll need more than just superficial charts that follow a company's stock price.
4. Determine the 'fair value' of a stock by weighing the company's recent performance, current news stories about that company or even developments in the industry, sales, profits and other salient financial data.
5. Hold these stocks, if you choose, for terms much longer than a day. Since the fundamental analysis approach is one of investing (long-term support of a company) rather than day trading (playing the market feeling to make a fast profit), you can hold for a day, months or even years without undermining the value of your portfolio.