Finding the best opportunities in the stock market beyond Ratio Analysis

If you’re reading this, then you already know that the stock market is teeming with a myriad of opportunities

If you’re reading this, then you already know that the stock market is teeming with a myriad of opportunities. But if you have invested, you also already know that there are a myriad of not-so-good opportunities that could lead to immense losses.

While it could be tough to predict the stock market, there are key metrics that can be used.

The usual metrics are ratios: profitability ratios to determine the earnings of companies, liquidity ratios to determine the ease with which companies can meet short term obligations, leverage ratios to determine the debt burden on the company, and so on.

However, when it comes to finding winners, there are a few more levels that are borderline fundamental analysis and technical analysis – and some of them are just about listening to the news. Here they are:

Overall market sentiment

Sometimes, it is not the stock that is bad but the overall market that is tough. Other times, it is that the market sentiment for the company’s stock you want to invest in is down.

It’s as simple as this – if the entire market is dumping its shares or if there are speculations about challenges in that specific industry owing to the overall economic landscape, now might not be the time to venture into it.

You will first need to see if there is a good opportunity. With the stock market, however, stocks tend to be correlated. Hence, if the market is going against one industry, have your eye around because it means that more often than not, there’s a winning stock on the other end of the pitch.

Charts (Technical Analysis)

Technical analysis is a form of financial analysis that uses patterns in market data to identify trends and make predictions. Used primarily by traders, the idea is to be able to periodically watch the market’s movements in order to predict changes and find opportunities first before everyone else.

You can look at intraday chart as well as day charts before trying to make any transaction – buy or sell. There are various tools that can be used and they help you determine various changes like moving averages, uncertainty around a stock, momentum building and so on.

It is, however, important to have the right combination of skills before you can be successful at this.

Stock market news and Industry News

Information is a key factor as it could determine the success or failure of an investor. We all know the need to keep an eye on the market; it is why Yochaa shows the movements in stock prices in real-time.

However, it goes beyond that as you have to be in the know about everything that is happening in the industries you have invested in or ones you intend to invest in.

Are there new governmental policies that could be beneficial to the industry or otherwise? Are there new changes in the operating landscape? Knowing what exactly is happening will ensure that you spot opportunities also ahead of passive investors.

Trade Volume

Another great determinant of whether a stock poses a good buy or otherwise is the volume of the stock that is traded. If everyone is rushing to it, there just might be something there. Also, if everyone is dumping it, there would be a warning sign.

Nothing, however, beats a holistic combination of methods, strategies, tools, and metrics. The game of investing is very holistic and does not exist in a bubble.

But it might be tough understand all that is happening in the market, carry out both fundamental analysis and technical analysis, watch out for the volume of trades carried out daily, and so on.

Your best bet is to have a clear objective and push at that specific objective consistently.

Written by Lawretta Egba