How to Find the Best Stock Trading Articles

How to Find the Best Stock Trading Articles

How to Find the Best Stock Trading Articles

best stock trading articles

Are you fond of reading the best stock trading articles? Well, they have been around for a long time now and they continue to influence investors because the information contained within them can be used in day trading. The two things that are commonly discussed in these articles are price and correlation. Price is the most commonly thought of factor yet it is actually the least significant of all in day trading though many people tend to focus on it the most.

 

Why is this so? Because it is the most easily misunderstood factor in trading. Most investors focus on price movement which is actually non-reputable because it is influenced by lots of external factors. As an example, how volatile a stock is affected by economic variables or other outside forces like how big a company is growing. You would not expect a $10 stock to suddenly shoot up over the past few weeks and suddenly plummet down to the point where you will never trade it again because its price has bottomed out and you need to get out while the getting richer is still good.

 

Correlation is also the most misunderstood factor of all. They are sometimes referred to as the “Achilles Heel” of trading due to the high degree of reliance on it. Most traders focus on P/E ratios or earnings growth for companies. However, they do not consider the other way round which is what really matters if you want to make money. What does earnings growth tell us about the health of the company’s future profitability?

 

The most important thing that investors need to learn from the best stock market articles is how to find stocks with high-profit potential. They should take note that earnings growth does not always mean that the company is profitable. You might need to do further research on the company before you dip your hands into the stock market.

 

However, the correlation between earnings and the net present value of the company is usually very high. This means that the value of the business may actually decline over time. This may result to a decline in the market value of the stock. Although the authors of the articles will stress that future growth is more important than current profitability, this cannot be stated enough times.

 

Correlation analysis should be done to check on the robustness of the correlation coefficient. Regression analysis basically says that the value of any given asset is equal to the sum of the corresponding losses or profits over a period of time. There are several ways on how to conduct the regression. The authors do not advise one from taking the traditional way of lagging the earnings growth by six months.

 

They recommend using the logistic regression model. This model allows the investor to plug the existing earnings growth rates, time period, and correlation period with the index that one wants to regress against. With logistic regression, there is also a confidence interval, which can be used to check if the results of the regression are reliable. The model can also be fitted with a logistic function, which is a mathematical equation that describes the relationship between the variables and their values. Once the function is fitted onto the data, there is a good probability that the regression can be fit to the data and produce the expected value of the stocks.

 

Another way of testing if the regression can be fitted well is to use the lagged effect. This means that the investors can actually determine the value of the stock using the actual values at a particular point in time but when the value stocks are going up the investors will have to buy more to offset the losses. Most investors do tend to lose out on the lagged effect, especially in volatile markets like the current one. Hence, it is important that investors know how to properly analyze the data they have and use the regression model. It is better to leave the equation to the professionals than risk losing your money.

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