When to buy and when to sell shares in Trading
We want to congratulate you. If you have arrived here it is because you have felt the call of the jedi of the markets and you are at the beginning of a big adventure.
If you are considering investing in stocks, the first thing you need to know is when to buy and sell stocks. This depends on a number of factors such as the economy, the company's earnings, its performance and the performance of other companies in the sector.
**What is trading? Trading is the buying and selling of assets (shares, currencies, cryptocurrencies, foreign exchange and futures) within a regulated financial market. Its objective is to make a financial profit when the value of the asset fluctuates.
When a person decides to buy a product or service, they usually pay for it. It is different when a person decides to buy a share. In this case, the person not only invests money in the company's shares, but also takes the risk that the company will either do business successfully or fail and move to the dark side of the markets. Therefore, it is important to know when to buy and sell stocks to minimise the risks.
**How to buy and sell stocks? There are two ways to buy and sell stocks:
1) Short term: This way of trading consists of calculating the probabilities of an asset going up or down in value, and waiting for a short period of time for it to reach the price you are interested in to buy or sell it.
2) Long-term: Stocks are bought in order to receive future profits. For example, when the company is in a bad economic state, or is a company with a great future projection. As the company is expected to improve, you buy shares thinking that they may be worth more in the future, and then sell them.
When to buy and when to sell shares? Our goal as market Jedi is to buy when stocks are "cheap "**. This may be due to large investors dumping their shares, bad news from the company, or an increase in the number of shares. But it's not easy, to figure it out you'll have to do a good study of the charts, so don't jump in without having sharpened your laser sword!
Because the problem is that we tend to think that a low price and a cheap price are the same thing, but this is not so. Stocks can always go lower or higher than they have ever gone before. **How do you know if the stock market is cheap or expensive? There are tools you can use to find out if the stock market is cheap or expensive.
One ratio that measures whether the price is expensive or cheap is the Price Earnings Ratio (PER). For example, the average P/E is usually 15 times earnings, so a stock with a P/E of 15 or less shows that it is a good time to buy.
Another way of calculating when to buy a stock is our percentage of safety. For example, if our safety margin is 20% according to our investment strategy, and the share is worth €100, the company must trade at €80 for us to make a profit.
In order to determine when to sell, it is essential to have formed a solid strategy, both in the event of a loss and in the event of a potential gain. The time frame will be determined by your trading style and education.
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The Canal Trader Masterclasses are made up of leading teachers in Spain who share their knowledge about trading to help us improve our trading. With 40 financial training sessions full of educational and human quality, that will help you to order and structure the market with head.
Because to invest in shares you must keep up to date with the financial market. Its movements influence the price of shares and if you detect a sudden increase in the price of a share, you should check if there is relevant news to explain this increase. If there is no news, it could be market manipulation, and in any case you must be prepared, young Jedi, to face the dangers of the dark side.
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