Key Consideration before entering Stock
- Fundamentals: Evaluating the Stock Books for consistent Profit, Loss,Debt. Generally if the company is zero Debt Company then its fundamentally good stock, as they don’t have to pay interest for debt and all the money can be used of investments.
- Market Capitalization: Current Market value of the company or current stock price.
- Return on Capital Employed :(ROCE) Profit before Tax and interest/Liabilities of the company.
If ROCE is greater than Capital Cost the company is doing good business and likely to give good returns Consistent ROCE increase means that the company is doing good.
- Debt/Equity Ratio: Total Liability/Shares. If debt is high or greater than 1, then we must not invest in company.
- Promoters holding: Shares of the owners of the company (generally should be more than 50%)
Pledged Promoters Holding: The shares that owner has placed with bank and got loan against it.
Counters:
- Average - Exponential - EMA is technical indicator. Generally if EMA crosses SMA from below, u can buy, and sell if it crossed SMA from Above.
- Average - Simple - SMA is again technical indicator used along with EMA.
- Bollinger Bands- Again technical indicator where the Movement will be within the Band, when the Share touches the lower band and reverses one can invest If Share touches the upper band an reverses once can go short or sell
- MACD - Another technical indicator based on EMA and momentum. Usually EMA,12,26 and9 are used .When MACD line crossed the Signal line 9, one can buy and if crosses from top
One can sell or go short
- Money flow index- Same as RSI indicator it will move from 0 to 100, BUY at 20 and sell at 80.
- Moving Average Envelope- Similar to BOLLINGER BANK, this is bank based on Simple Moving average (SMA).Values 20,2,2.5 when 2.5% is the band. Not much of use. Ignore it
- Price Median - (Price High + Price Low)/2
- Price ROC -price Rate of Change, if it crosses '0' and less than '0' SELL
- RSI- Buy if it crossed 20 and sell if it crosses 80
