How to Buy Stocks for Beginners (Part 1)

How to Buy Stocks for Beginners

You have to open an account in the shares and securities cannot wait to buy the stock. Before buying stocks, what should you consider?

In my opinion, you must do three stages, namely the question and answer:

I. What and Why

II. Amount How and at What Price

III. When and How

Let us examine one by one. (This process is one part of the "Trading Plan" or the Trading Plan.)

I. What and Why

Before buying stocks, the first question you must answer is: what share and why. Stock players usually know "what" he wants to buy. But "why" he bought the majority stake players cannot answer. So as a beginner, you should familiarize yourself asking "Why," what reason do you risk your hard earned money in stocks, for example, ASRI (Alam Sutera Realty).

The reason you buy a stock should be as specific as possible. So, do not answer, "Because I want to make a profit." Everybody buy shares in expectation of profit. All you have to answer is why the stock has the potential to go up and give you an advantage. Is it because the stock was cheap, or because the company is expanding, or because the product sells. Or it could be due to technical analysis Moving Average or Stochastic or MACD signal that stocks tend to rise. (Please read the post "Decent Shares Bought in Technical Analysis.")

Indeed, it is very difficult to answer the "why" of a stock should be bought, especially if you are still a beginner. You need to learn how to analyze stocks, both in terms of fundamental, technical, or other analyzes. (Please read the post "How to / Techniques Analyze Stocks.") Takes years of experience playing the stock before you can find a good reason "why" you buy stocks.

Therefore, as a beginner, you should start by trying the advice of others who are more experienced than you. This advice can you get from reading (books, newspapers, research analyst) or directly from someone (broker, friend, brother).

"I bought this because, according to analysts UNVR cheap and good fundamentals," such as your answer. Legitimate. What you should notice is how the analyst track-record. Is his advice pretty accurate in the past? If you do not know the track-recordnya, buy stocks he suggested in small quantities. With the passage of time, trying to gauge the accuracy of the analysis.

You can also follow the advice of the book you read. "Peter Lynch in the book" One Up on Wall Street 'suggests buying shares its profits continue to rise. "As a company's profit rose steadily, I decided to buy shares" is an example of a good enough answer.

If you got a suggestion from a friend to buy shares UNTR (United Tractors), do not immediately buy. Ask the reason "why." When your friends can not answer satisfactorily, do not buy it.

Bottom line: you should be able to answer the "why" you buy a stock; it does not matter whether the answer was the result of your own thoughts or the results of other people's thinking. Never buy stocks without reason that answers the question "What" and "Why" is the main factor determining whether you will profit or maimed.

Note that the "what" and "why" the two questions are are closely linked and cannot be separated. The most common measures are you to decide "what" the purchase, and then you are looking for an answer "why." But you could also have defined the reasons "why," then you just specify "what" to buy.

My point is this: could you have determined you want to buy shares of Semen Gresik (SMGR). That is, you already know the "what" you'd like to buy: now you have to answer the "why." Could you also do the opposite? Suppose you decide to buy only stocks with a Price Earnings Ratio (PER) (Please read the heading "Investment Shares How Peter Lynch at Book 'One Up on Wall Street", Section V) under 10. You already know the "why" of his, so you just pick and choose "what" of shares that must be purchased.

But, you protest, I am really a beginner and have no idea at all "what" should I buy, especially "why." Keep me where to start?

If you do not know where to start, my advice is as follows: Pick 5 to 10 stocks that interest you. Shares of this option are "what" you are going to buy.

Avoid stocks "fried" or small stocks are very large price fluctuations. Start with large cap stocks-are categorized as "blue chip." (Please read the heading "Shares term meaning 'Blue Chip'").

Why?

Your chance of a big loss in stock "blue chip" is relatively much smaller than in the stock fried. Read carefully before this sentence: I cannot tell you the possibility of loss is relatively small, but chances are you lose BIG comparatively smaller. As a beginner, you should do not control is a great loss that threaten your financial security.

Having established the "What", monitor the stocks mentioned. Read news, learn the fundamentals, and follow the movement of the stock prices. After that, decide whether you are a long term investor or a short-term trader? (Please read the heading "Investment Shares or Stock Trading, Which is better"). Then determine how the stock analysis is more appropriate for you, whether fundamental analysis or technical analysis or analysis of other ways. (Please read the heading "Method / Technique Analyzes Shares").

When you buy a stock, write down the reasons "why." If the results are profitable, continue. If the stump, try to fix those reasons or for reasons that new. No stock movement patterns. Look for shares of motion patterns that generate profit.

Through the above process, slowly you will find the answers to "why" you buy a stock. At one point, with enough experience, you do not need to spike the advice of others: you could formulate their own answers to answer the "why" you buy a stock. That's when you have "first class" of players share novice into an experienced stock player.