Trading for a Living
bor because they know the importance of
associated properties and how they will
have an impact on the valuation of their
identified property. Trading and invest-
ing in the stock market is very similar.
If you develop the habit of checking the
surrounding “neighbor”, understand the
attraction or valuation of those related
properties; you will increase your chances
for successful investment selection.
by Chief Trader Bruce E. Dinger
www.KTCashFlow.com
T
rading in the stock market
can be challenging if you
do not have a clear roadmap
and recipe for success. The
purpose of this article is to provide
some key structure in selecting your
investments or trades. Follow this
process and your chances for finding
high-probability successful trades are
likely to increase.
1. Industry Group
The most common mistake that inves-
tors make is looking at an individual
stock without reviewing the industry
group’s performance. It is key that
investors start their due diligence by
examining the performance and trend
of the overall industry group. Savvy
investors understand the importance of
a “top-down” analysis approach and
know that old saying “a rising tide lifts
all boats”. So if you truly want to in-
crease your chances for success in the
stock market, start with the attraction
or trend of the industry group before
identifying any individual stock.
The 2nd thing you need to do BEFORE
you think about pulling the trigger and
placing that trade is to check under the
hood, what is better known as the “funda-
mentals”. Many investors think they need
a degree in finance, but even a simple
look at the company’s basic fundamentals
will give you a sense for the strength and
viability of their business. It is also important to note global trends
for the company’s supply and demand of
their products and services. Successful
investors and traders understand the im-
portance of noting trends and classifying
them as “cold, warm, hot, and explosive”.
Yes, analyzing global trends does take
time and a commitment to serious due
diligence, but the payoff can be HUGE.
Key Fundamentals
Here are some key trends to note and com-
pare to the company’s closest competitors. Finally, under “trends of interest”, an
investor should focus on the leadership of
the selected company. Determine if the
executive team are seen as visionaries,
great business leaders, or underperform-
ers. If they have major followers, chances
are great that the stock valuation has solid
upside potential.
Revenue
Net Income
Profit Margin
Return on Equity
4. Analysts
3. Trends of Interest
Industry or sector analysis is very sim-
ilar to a real estate investor purchasing
a property. The real estate investor
first focuses on the surrounding neigh-
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2. Fundamentals “footprints of the elephants” and noting if
the big investors are putting their money
on the line with your stock of choice.
While the investment from a big money
manager is no guarantee that your stock
is going to do well, it does increase the
probability. Another trend to watch for is
“insider buying”. There are many reasons
that executives of a company sell their
shares, but there is usually one main rea-
son that they buy shares of their company
– they believe it is undervalued.
Critically important is to look for trends
of interest. This means starting with the
PAGE 92 • 2014
Many investors dismiss analyst ratings but
this is a mistake. After doing your above
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7 Key Ingredients
for Successfully