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making money on stock market

3 Methods for making money on the stock market

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making money on stock market

Today i am going to share with you my knowledge on making money on stock market.

Making money on stock market: Method 1

The first method on making money on stock market is to invest in stocks for the long term.  like Warren Buffet. Look for a good company and invest for long term. Every time a company performs well and the results are better than expected then the value of the stock of that company will increase. So you will have to do a good research on that the company and the market that they are active in.

When you do a research you have to look at the potential of what a company can be. After all investors invest because they believe they will make a good profit in the future. So when you invest in a company make sure you know exactly what the potential of the company is and know if the current CEO and his/her management team can make this potential come true. As you all probably know, a company can only grow if they have a good CEO with his/her management team.

How to recognise a good management team?

One of the best way to know if the management team  is good, is to check the company’s quarterly results and see if the management team of that company  have achieved their goal or  did they do better than what wall street analyst had  expected. Most companies have we website with a section investor relations. You can find the quarterly results on the investor relations section. Or just google for it.

Now a example of a company that has a clear potential is Starbucks. Starbucks potential is that they can open thousands of store in the future where consumers can enjoy their Starbucks products. So it is easy to understand that the more stores they open, the more money they can make. And thus the value will go up in the future.

A example of a company that doesn’t have a clear potential is Twitter. For me I don’t see or understand what the potential of twitter is. Like all social media, their revenue is relied on ad revenue. To earn more ad revenue, twitter needs more unique users. At this moment I don’t see how twitter is going to create a large base of unique users compare to Facebook and snapchat.

 

Making money on stock market: Method 2

When you buy a stock, you can buy a dividend stock. A dividend stock gives investors a piece of the company’s profit. In the video How make to make a passive income with dividend, i explain more about this subject.  

Making money on stock market: Method 3

The third method on how to make money stocks is by going short. You probably have heard the term of going short on the market. This one of the few ways of making money when the stock market goes down. Meaning that you can earn a profit when the stock price value goes down.

So how does this work? When you are going short, you are making a deal on contract with a buyer. In this contract you have a deal that the buyer will buy the stocks of you for the current stock price where you have just gone short. So if the price dropped in the future then you are making money. However if the price goes up then you will be losing money. Because when you go short , your broker buys the current stock and hold it for you. So when the stock price goes up , you will have to pay the difference to your broker. This procedure is called margin call.  Each broker have their own margin call policies. In  margin call you have a deal with your broker , that if price goes over % of the stock price value of your short position. Then you have to pay for the difference.

So guys these are the three methods were professional traders, investors make money on the stock market. If you have any questions or remarks, please put it in the comments section. We will get back to you as soon as possible. Thanks for reading and good luck with making money on the stock market.

Read more about CFD Trading: How to make money with CFD Trading

2017 stock market

2017 stock market: New hope, New beginning

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2017 stock market

In a few weeks it will be Christmas and after that we will have a new years eve. If we look back at 2016 a lot have happened. But 2017 stock market will be the year that will bring us a lot of new hope. And for some a new beginning (US ,UK, EU). In 2017 there are a lot of elections in Europe. Countries such as the Netherlands, France, Germany and Italy will choose their new presidents or prime ministers. These elections might give fear to investors, which will lead the European stock market into a bearish trend.

 

2017 stock market: Brexit

The prime minister Theresa May is aiming to start article 50 by the end of March 2017. By triggering this Article 50, the Uk can start the procedure and negotiation talks to leave the EU union.

When the Brexit was voted, Juncker was eager to start the negotiation talks as soon as possible. Seemed he was well prepared for that. But I think times have turn a bit to the Uk advantage. Because the UK has already a few companies, that promised to stay after the Brexit. And a few companies like Apple promised to keep on investing and creating jobs in the UK.

The Brexit negotiations talks will have an effect on the European stock markets for sure. Whether it will be negative or positive it is hard to tell. But one thing will be sure is that both parties will do their best to create the best environment for business to go or stay at their place. So in the end the Brexit thing might be the best thing that has happened for businesses.

As a thought I think when the start of the Brexit negotiations talks begins that the markets will react for a short period of time. Because I think that both parties will try the calm down the markets. After all a crashing financial markets looks bad for politicians. And the ECB and BOE won’t stand on the sideline either.

 

2017 stock market: Donald Trump

On one of my youtube videos, I had predicted that Donald Trump would win the election. Since the win of Trump the stock market has been hitting new all time high records. We are currently in a bullish trend.As long Donald can make his promise come true about the tax reduction and getting rid of some regulations rules for businesses in the current positive economic growth of US, then I don’t see a reason yet of why the bullish trend of the 2017 stock market has to stop.

However the markets will go down as soon Donald’s China teasing takes a serious form. Right now I think that Donald is testing the waters with China to negotiate a better trade deal.

 

Other things to keep a eye on in 2017 stock market

A few other things to keep an eye on are the Russian 2017 stock market and its currency Russian Rubble. I think both of them will go higher in value in 2017. I think that Putin will succeed in persuading US and Japan in cancelling their economic sanctions against Russia. And more importantly I think that Oil prize will stabilise. Both of these factors will benefit Russia well.

Bitcoin will continue to go in price as well, the reason for this is mainly China. China will continue to face challenges to stabilise their currency Yuan against the US dollar.

twitter stocks review

Twitter stocks: Too dangerous to trade

Twitter stocks

Twitter stocks are growing in value steady because off rumors

Hi guys. In today’s blog i am going to discuss of what is happening too Twitter stocks lately and why it is too dangerous to trade in them right now.

What is going on with twitter stock?

Since two weeks there  a rumor was started that Walt Disney was interesting in buying Twitter. And from there on many names of other buyers started to line up. Such as SalesForce, Alphabet (mother company of Google), Facebook, Apple, Microsoft and so on. Because of those rumors Twitter stocks has grown in value more than 25% in less than two weeks. From all those rumors it seems that Alphabet is really interested in buying Twitter.

According to Yahoo Google is seeking advice from Lazard bank for the acquisition and merge with twitter. According to most analysts from all those interested buyers, Alphabet will benefit the most from buying twitter. However I think Facebook will benefit a lot from it as well. Because if Facebook can buy twitter then they increase their dominance in the  social media industry.

Why is it so dangerous to trade in Twitter stocks right now?

twitter stocks takeover

twitter stocks takeover

As you can see in the graph, you will notice that value of twitter stocks has been growing explosive in a short period of time. With the current state of twitter stock it is impossible to determine what the resistance and support level is of twitter. Further more if the rumors are starting to fade away, then you can expect a fall back in twitter’s stock price. The fall back in twitter stocks price won’t be big but there is not much to gain now at the moment. As long there is no serious bids of other companies. I strongly believe that consolidation in twitter’s stock price will kick in when there is no new rumors about twitter’s take over. However when the bids being make official then you can expect a strong price movement.

Want to know more about twitter stock and its business? Then watch the video below.

starbucks stocks split history

Starbucks stocks still a safe investment?

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starbucks stocks

Hi guys,

 

Today we are going to take a look on Starbucks stocks. We are going to look at three things.

 

Number one:  Stock performance of Starbucks

 

Number two: How is the company doing in term of business

 

Number three: Speculation on Starbuck stock price

 

Starbucks stocks performance

Starbucks stocks price movement

Starbucks stocks price movement. Source: finance.yahoo.com

If you look at the chart, you will notice that the stock price movement has been really small in the last two weeks. Which means that the current trend of Starbucks stocks is sideway’s. It doesn’t really go up big or go down big.

 

So far this year Starbucks stock price hasn’t performed well compared to last year. But it didn’t performed worse as most of the oil companies. Since the stock split last year, the price value of the starbucks stock has increased with roughly 23,67% .

 

If you take  look again at the last two weeks performance of the starbucks stock price it seems that we are about to change the trend. Meaning that we might go up again. The volume of trading starbucks stock have dropped significantly. As you see, the lower the price go , the lesser investors are willing to sell their  stocks.

 

How is the company doing in term of business?

 

According to their last announcement on 11 August 2016, Starbuck is going to expand their distribution center with a extra of 1.2 million square feet. With this expansion, the distribution centre capacity will be increased with 35%! So this means that Starbucks is expecting that their business will grow more. Which is good news for investors like us.

 

So let’s take a look of how the business was doing in the third quarter. We see that sales in the US has increased with 4%, In China had has increased with 3% and in Europe there was a decrease of 1%.

The net revenue grew with 7% to a record of 5.2 billion dollars. And 474 new Starbucks stores were opened in this 3rd quarter.

starbucks stocks q3 results

source: investor.starbucks.com

So we can safely say  that the business of starbucks continued to grow. But it hasn’t grow as much as it did in the previous quarters. If you look at that chart. You will see that sales growth has been decreased. According to Howard Schultz , the CEO & chairman of Starbucks,  sales growth will back on his normal track of 5% or more soon. So how is this going  to reflect on the future stock price?

 

Speculation on Starbucks stocks price

 

When the third quarter results of starbucks was release, the stock price went down with 4%. And since then it kinda got stuck on that price level of 55 usd.

After the dividend pay out of Starbucks earlies in august, it seems that stock price is consolidating at a price range of 55 dollars and 56 dollars. If  this is so , then it means that the price range of 55-56 dollars will be the new support level for the starbucks share price. The only way to get this confirmed is to watch the stock price of Starbucks bounce off that price level a few times. If this going to happen then we may  see that the stock price of  starbucks will move into a bullish trend. And i believe that once the stock price close above the 60 dollars. That we will go into a strong bullish trend.

 

If you are looking for a long – term perspective. I think that the fundamentals of Starbucks stocks is solid and with stores expansion and adding new products such as recently gluten free products and Almond milk. I am confident that the Starbucks share price will eventually go to newer heights.

 

And one more thing… If you had bought the  100 Starbucks stocks  at ipo for a total investment of 1700 dollars in total. ( that was the introduction price). Then you would now own more Starbucks stocks because of the stock splits, that has happen a few times. But your current value would be around 300.000 dollars. As long as Howard Schultz remains CEO , then we all will be fine.

starbucks stocks split history

starbucks stocks split history

 

 

Source: investor.starbucks.com

 

Newsource: https://www.thestreet.com/story/13676975/2/almond-milk-other-non-dairy-products-could-stir-up-starbucks-profits.html

 

finviz.com

Current Starbucks stock price:

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global macro overview March 22 2016| 101trading.co.uk

Global Macro Overview| March 22 2016 | 101trading.co.uk

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Macro Global View|22 March 2016 | 101trading.co.uk

Global macro overview for 22/03/2016:

 

The German Ifo Business Climate data was released this morning. A slight improvement can be noticed as the indicator was at the level of 106.7 points, beating expectations of 106.1 and prior reading of 105.7. Nevertheless, the next sentiment data in the form of ZEW Survey was worse than expected. The ZEW Current Situation indicator decreased to the level of 50.7 from 52.3 in the last month and was below the forecast of 53.0. The ZEW Economic Sentiment indicator declined to the level of 4.3 (5.9 expected), but was better than the last month’s figures of 1.0. In conclusion, the overall business and economic sentiment did not improve significantly despite the recent ECB actions, including expansion of the QE program. This is not a good sign and it should put more pressure on the euro. Let’s now take a look at the EUR/USD technical picture at the 4h time frame. A bull run towards the recent swing high at the level of 1.1376 did not result in another higher high in this pair. Bears took control over the market as they had pushed the price below the important support at the level of 1.1218. The next support is seen at the level of 1.1066.

global macro overview March 22 2016| 101trading.co.uk

global macro overview March 22 2016| 101trading.co.uk

The UK inflation rate was unexpectedly unchanged in February, remaining far below the Bank of England’s 2 percent goal.

The Office for National Statistics revealed this morning that the consumer price index was at the level of 0.3% (vs. 0.4% expected and 0.3% prior).

Core inflation, which excludes volatile food and energy prices, remained at the level of 1.2 percent. In conclusion, the inflation level has been stubbornly low for the last two years, largely due to lower oil prices.

The BoE Governor Mark Carney reiterated last week that there are low chances that the interest rate will be cut or that it will enter the negative territory. Thus,the next move should result in a long-time rate increase.

global macro overview March 22 2016| 101trading.co.uk

global macro overview March 22 2016| 101trading.co.uk

Let’s now take a look at the technical picture of the GBP/USD pair at 4h time frame. After making a new local high at the level of 1.4515 the market has fallen toward the 50%Fibo at the level of 1.4290, breaking the support at the level of 1.4427 with ease. Currently, it looks like bears want to push the prices even further down, towards the 61%Fibo at the level of 1.4229. Any breakout below this level will result in an immediate test of the golden trend line.

Sebastian Seliga |instaforex.com |101trading.co.uk

Sebastian Seliga |instaforex.com |101trading.co.uk

 

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march18 eurousd2|101trading.co.uk

Trading Recommendation for EUR/USD | 18 March 2016

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Trading Recommendation for EUR/USD | 18 March 2016 |101trading.co.uk

march18 eurousd1|101trading.co.uk

march18 eurousd1|101trading.co.uk

In January 2015, the EUR/USD pair moved below the major demand levels near 1.2100 and 1.2000 where historical bottoms had been previously set in July 2012 and June 2010. Hence, a long-term bearish target is projected towards 0.9450.

 

In March 2015, EUR/USD bears challenged the monthly demand level of 1.0570, which had been previously reached in August 1997. Later in April 2015, a strong bullish recovery was observed around the mentioned demand level. April’s monthly candlestick came as a bullish engulfing one. However, the next monthly candlesticks (September, October, and November) reflected a strong bearish rejection in the area around 1.1400.

 

December’s candlestick came as a bullish engulfing one, allowing the current bullish pullback to take place towards 1.1370. Previously, the price zone of 1.1350-1.1400 acted as a significant supply zone during the previous bullish pullback. Hence, another bearish rejection should be expected around the current price zone during the current bullish swing. On the other hand, the level of 0.9450 will remain a long-term bearish target in case the current monthly candlestick closes below the depicted monthly demand level of 1.0570.

march18 eurousd2|101trading.co.uk

march18 eurousd2|101trading.co.uk

In November 2015, daily persistence below the level of 1.0800 (prominent key level) ensured enough bearish momentum towards 1.0550 (monthly demand level) where the most recent bullish swing was initiated. During the last few weeks, a consolidation range between 1.1000 and 1.0800 was established on the daily chart. On February 3, a bullish breakout was executed above this consolidation range.

 

That is why a quick bullish movement took place towards the zone of 1.1350-1.1400 where previous daily bottoms and the backside of the broken uptrend were depicted on the daily chart. On February 12, a strong bearish engulfing daily candlestick was expressed near the mentioned supply zone.

 

Hence, a quick bearish decline towards 1.1000 was executed. A temporary bearish breakdown below 1.1000 (upper limit of the broken range) was seen on the daily chart. A quick bearish decline was expected towards 1.0820 where the most recent bullish swing was initiated.

 

Last week, a bullish fixation above 1.1000 was mandatory to allow further bullish movement to take place. More bullish targets were expected around 1.1320 and 1.1400 (currently being visited).

Similar to what happened on February 12, the supply zone of 1.1350-1.1400 remains a significant resistance zone for the EUR/USD pair to offer bearish rejection and a valid sell entry.

 

Trading Recommendation: A valid SELL entry can be offered around the current supply zone of 1.1350-1.1400. T/P levels should be placed at 1.1200 and 1.1070. S/L should be placed above 1.1460.

Michael Becker | Analytical Expert of Instaforex| 101trading.co.uk

Michael Becker | Analytical Expert of Instaforex.com| 101trading.co.uk

 

 

EUR/USD |101trading.co.uk

Global Macro Overview |14 March 2016| 101trading.co.uk

Global macro overview for 14/03/2016:

In the regional elections taken place last Sunday the German voters punished Chancellor Merkels conservatives, giving a thumbs-down to her open-door refugee policy and turning in droves to the anti-immigrant Alternative for Germany (AfD). The result is a big setback for Merkel, who has led eurozone’s largest economy for a decade, and could narrow her room to manoeuvre as she tries to convince her EU partners to seal a deal with Turkey to stem the tide of migrants.

The political party of Merkel, the Christian Democrats (CDU), lost ground in all important states – Baden-Wuerttemberg and Rhineland-Palatinate in the west and Saxony-Anhalt in the east – which were together widely seen as offering a verdict on Merkel’s liberal migrant policy. In conclusion, this contest was the biggest of Merkel’s third-term and the broadest electoral test before the next German federal ballot in 18 months.

If the main ballot get even worse, that this one, the future of the EU policy towards migrants and the whole economic foundation’s might be completely changed, influencing the financial markets. Let’s now take a look at the EUR/USD technical picture in the H4 time frame after the last rally on Friday. The local top was established at the level of 1.1217 and the market slowly went lower to test the support at the level of 1.1079.

Currently, bulls are trying to re-gain the control in the market using the level of 1.1079 as a technical support to rally towards the level of 1.1217. Only a clear and sustained violation of the level of 1.0822 would change the current picture from bullish to bearish again.

EUR/USD |101trading.co.uk

EUR/USD |101trading.co.uk

Sebastian Seliga|Analytical Expert |instaforex.com |101trading.co.uk

Sebastian Seliga|Analytical Expert |instaforex.com |101trading.co.uk

forex trader

Forex Trader, questions that you need to ask

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Forex trader

Does Your Forex Broker Make The Grade? Must Ask Questions For Any Forex Trader

When it comes to forex brokers, there are more than a few to choose from; however, they are not all created equal. When it comes down to your money, you need to be certain that the broker you use is able to meet your expectations. You have every right to ask questions, and to compare Forex brokers in order to choose the right one. You can check our brokers review here: brokers review

Why does size matter to a Forex trader?

When it comes to choosing the right broker for a Forex trader, size definitely manners. Since the forex market is a type of over-the-counter market, offering no type of centralized exchange, not everyone will receive access to the same prices or the quality of trade execution. Institutions that have the biggest trade volume and the best financials will have access to the better execution and prices. When you find a bigger broker, they will be able to pass on these advantages of their size, better execution and prices, to you.

Who will execute the orders for a Forex Trader?

Not all of the forex brokers will quote rates the same way, some of the options include:

  • A dealing desk: This means that the forex broker is creating the pricing and then executing the orders for the Forex trader.
  • No dealing desk: this will mean that multiple banks are streaming competing prices through the forex broker, so that your orders will be executed by the actual banks.

What type of spread is used for the Forex Trader?

There are a number of options a Forex trader needs to consider when it comes to the spread:

  • Fractional Pip Pricing: The majority of major currency pairs will be quoted to four decimal places, which means a pip will usually equal .0001, which is one basis point. Most brokers will round the price to the nearest pip, but others now offer fractional pip-pricing. This adds another decimal, which means spreads are typically accurate and tighter.
  • Scalping the Market: There are some traders that prefer a short term scalping strategy, which will involve placement of the orders in the spread. In order for this method to be profitable, the market maker has to lose, which is why some brokers do not allow this. This is a risky strategy.

When you evaluate the methods that are used by various forex brokers, you will be able to find one that meets your investing goals. Taking the time to consider the things here will allow a new forex trader to find a quality broker who will look out for your best interests. You can try these two demo accounts for free. Plus500 and Instaforex are one of the best brokers around at this moment.

<a href=”https://www.instaforex.com/” data-mce-href=”https://www.instaforex.com/”>InstaForex is a universal Forex portal for traders</a>

fundamental analysis on commodities

Fundamental analysis on commodities

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Fundamental Analysis on commodities

There are types on fundamental analysis that we used here at 101trading. The first one is fundamental analysis on shares/stocks, the second one is fundamental analysis on forex and in this article we are going to discuss the fundamental analysis on commodities. In this article you will learn what a fundamental analysis on commodities is and you will learn on how to apply it for your trading.

What is a fundamental analysis on commodities?

A fundamental analysis on commodities is a analysis that is focused on the factors that have impact on the supply or demand side of a commodity. With the fundamental analysis on commodities traders and investors can try to predict of what the price of a commodity will be like in the future.

Fundamental analysis on commodities: factors that can influence the demand size

When are you are doing a fundamental analysis on commodities one of the first thing that you should be checking is the demand side of that commodity. For many commodities the general rule is that when the economy of countries are growing the demand side for commodities will grow as well. And because of that the demand side will grow faster then the supply side of the commodity. In this case the supply can not meet up with the demand so the producer will sell its commodity to the highest bidder. So in general when the demand keeps growing and the supply side stay still, the prices for commodities will increase.

What are the factors that can influence the demand size of a commodity?

There are many factors that can influence the demand side of commodities. In this article we are going to discuss the three major factors that can have influences on the demand for commodities.

Price

Price is one of the factors that has influence on the demand side of a commodity. The general thumb rule is that when the prizes of a commodity decreases the demand will increase. Its simple economics. For example if the gas price is £ 1,- per litre, you would use gas more then if the gas price was £3,- per litre. The cheaper it is to more you will use.

Economic growth

Economic growth has a impact on the demand side of the commodity as well. If they economy is growing as expected or better then expected the price of commodities will grow in value. However if the economy is growing slower then expected the price of commodities will go down. As you may guess if there is no economy growth in the present or in the future the value of a commodities will go down.

Politicians and central banks

Politicians and central banks are the ones that creates policies that should support the economy of their country. Sometimes it works well and sometimes it doesn’t. Although it may take a while before the policies get implemented the markets usually reacts first. Causing either a increase or decrease in demand.

What are the factors that can influence the supply side of a commodity?

Price

While a decrease in price creates a increase in the demand. The decrease in price of commodities has a other effect on supply. If the prices of commodities decrease  the supply will decrease as well under normal circumstances. The reason for that is that it doesn’t makes any sense for a producer to produce a lot of commodities for a low price. When the prices of commodities increases the supply will increase as well under normal circumstances. A high price is attractive for a producer to produce a lot of commodities as he can earn more money.

Economic growth

A increase in economic growth leads to a higher demand which results in a higher price for commodities. And as you know by now a high price for commodities will increase the supply of commodities. When the economic growth is below expectations the demand will decrease which leads to a lower price of commodities. As you know a lower price in commodities equals a smaller supply of commodities.

Politicians and central banks

Politicians and central banks are the ones that creates policies that should support the economy of their country. Sometimes it works well and sometimes it doesn’t. Although it may take a while before the policies get implemented the producers usually watch from the sideline what effects it has on the prices and prepare measurements to take when it is needed. Causing either a increase or decrease in supply.

How to make money with fundamental analysis on commodities?

The first thing in making money with fundamental analysis on commodities is to understand the factors that have influences on the demand and supply of commodities. The second thing on the fundamental analysis on commodities is to remember these two formula’s:

1. When the demand is bigger then the supply = a increase in prices of commodities

2. When the supply is bigger then the demand = a increase in prices of commodities

The third thing that you need know is that when the prices of commodities are too low , the producers will shrink the supply so that the demand is bigger then supply again which will lead into a increase of prices for commodities. When you hear that the producers are announcing that they will shrink the supply then you will know that a bullish trend is coming for the commodities. As a trader and investor you can make money by going long.

The opposite will happen when the producers are announcing that they are going to increase the supply. The prices of commodities in this case will go down. You as a trader and investor can make a huge profit by going short.

If you want to make money in commodities, you can open a demo account here: commodity demo trading account or open a real account here: trading commodities with a small budget

fundamental stocks analysis

Fundamental Analysis on stocks: How do you do it?

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Fundamental Stocks Analysis

Fundamental Stocks Analysis

When you do a fundamental stocks analysis, all you want to gain out of it is to understand how the company operates, their strategy, the success rate of their strategy, the financial health of the business and the company  future plans. By reading and analysing reports you will know how the company is performing and how healthy the company is in the current market condition. If you read the reports of the competitors as well then you will what position your company is on the market.

Why do people use fundamental stocks analysis?

There is an idea in the markets that the stock market may value a company wrong from time to time. Profits can be made by finding stocks that are underpriced. According to the methodology of fundamental stocks analysis the market will eventually value the stock at the right price.

One way of performing a fundamental analysis on stocks is to analysing the financial reports from companies. Each quarter the company gives out their financial result that they have achieved in the previous quarter. By analysing these financial reports, you will gain a better understanding and insight of the value of different company and you will understand how they got priced in the stock market. By doing this you will get to know if a stock is overpriced or underpriced.

5 key factors of a fundamental stocks analysis to look at

  1. Earnings

The first key element to look at when doing a fundamental analysis on stocks is earnings. You need to know what the earnings are. When you know what the earnings are, check it and compare it to the forecasted earning that was done by the CEO of that company. This way you will know if the company strategy is working good. And if the company is profitable or not. Future earnings are a key factor as the future prospects of the company’s business and potential growth opportunities often determines the stock price.

When you are performing a fundamental stocks analysis on you will find out that the factors that determines the earnings of a company are revenue, cost , assets and liabilities. In order to get a simple view on the earnings is too look at the earnings per share (EPS). The EPS is calculated as follow: The total earnings of a company divided by the numbers of the outstanding shares of a company.

  1. Profit Margins

The next key factor to look at in the fundamental stocks analysis is the Profit Margins. Now there is one thing that you need to know first and that is that the total revenue of a company doesn’t tell you the whole story of how well the financial situation is of a company. When you look at the profit margin of company it gives you a new information insight on the financial situation of a company. For instance a profit margin can tell you how much money a company keeps from it’s revenue. This profit measure is therefore extremely useful for comparing similar companies that operates in the same markets. It’s one of the best method to determine which company performs better in a certain market

A high profit margin indicates that a company has lower cost and therefore more profit. Some professional investors and hedgefund managers use the profit margins to see which company has a better control of cost in the same market.

  1. Return on Equity (ROE)

Return on equity is a financial ratio in the fundamental stocks analysis that measure how much profit is being made with the current available equity of the company. Basically it tells how much profit is being made with your investment.

Example:

Company A and company B are both making a profit of $10 million. However company A has a equity of $100 million while company B has an equity of $500 million. In this case the ROE of company A will be 10% and the ROE of company B will be 5%. What this tell us is that company A make the same profit as company B but with lesser equity. If company A had the same equity as company B, company A would have made much more profit. In this case based only on the ROE it would be a good idea for a investor to invest in company A as he gets more profit.

  1. Price-to-Earnings (P/E)

Price to earnings (P/E) is a other very popular financial ratio in the fundamental stocks analysis. What the P/E does is that it tells you quickly what the value is of a stock. The calculation of the value P/E value goes as follow: current market price divided by the earnings per share (EPS).

What does the value of a P/E of a stock tell?

A low P/E value means that a stock is under valued. When a stock is under valued it basically means that the current stock price is cheap and it hasn’t reach the price that it should be.  A high P/E means that the current stock price is more expensive. Now you might think that when a stock has a high P/E value that the stock price will go down. But often it doesn’t go down. As the stock price includes many factors such as earnings, profit margin and growth potential. Often a high a P/E of a stock indicates that many traders and investors believes the current stock value is under valued as they believe that the company will earn a lot more in the future. Therefore although the P/E is high they still see it as cheap compare to the future worth.

  1. Price-to-Book (P/B)

Price to book ratio is a financial ratio in the fundamental analysis stocks that compare the stock market value against its book value of the company. The calculation for this financial ratio is as follow: current share price divided by the book value per share (according to the latest financial statement) or use the market capitalisation of the company and divided it by all the shareholders equity.

So what does this financial ratio tells you about the company? What the ratio tells you is that if you are paying too much or too little for a stock as it denotes the residual value if the company went bankrupt today. A higher P/B ratio than 1 denotes that the share price is higher than what the company’s assed would be sold for. The difference indicates what investors think about the future growth potential of the company.

What is the right price to buy?

The thing with fundamental stocks analysis is that in the long run the stock price will be reflected through its fundamental true value. However in the short- term the stock price of a company might go in the wrong direction. This because that there are still factors that can have influence such as news releases and changes in the future outlook of the company. Trends, investors emotions also effects the short term price fluctuations which results that the current share price is different from its true value.

What is the best way to make money with fundamental stocks analysis?

Longterm

If you are using the fundamental analysis on the right way you can make a lot of profit in the long term. For example in the article I wrote about Starbucks of why I invested it for long term was based on based on the fundamental analysis on shares/stocks. However for entering the buying price I used the technical analyses. I have bought the shares in 2014 and currently my return on investment is over 70%.

Short term 

Not many knows this but you can make a lot of money on short term with using fundamental analysis stocks especially when you are going short or when a company seems to be hit by bad news that barely effects the company revenue. For example if you that something has changed in the fundamental analysis stocks that can have influence on the companies revenue, then the first thing you need to do is check the technical analysis to see what the current price trend is of that stock. Then check if the stock price is near support level or the resistance level. A change in the fundamental analysis stocks will break many support levels or  many resistance levels.

 

The best way to make money from stocks in my experience is too use a combination of fundamental stocks analysis with technical analysis for entry and exiting. The fundamental stocks analysis is best use to determine why the stock should get more or less value in the future. And the technical analysis is best to use for understanding the price movement( that is based on the past) to determine whether it is a good time to buy or sell the stock for a certain price.