Successful Ratio Investing
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Successful Ratio Investing
Successful Ratio InvestingBy www.CandleStickForums.com
www.CandleStickForums.com Successful long term investing as well as short term and day trading depend on basic information about how stocks can be expected to perform in the near and long term.
www.CandleStickForums.com The long term investor is interested in such things as the price to earnings ratio or cash flow ratios as measures of intrinsic stock value.
www.CandleStickForums.com The day trader is interested in these same factors as they can tell him where the stock price might go next, up or down.
www.CandleStickForums.com Successful ratio investing requires that traders as well as investors routinely look a quarterly reports showing how a company is doing.
www.CandleStickForums.com Successful ratio investing depends to a large degree on fundamental analysis.
www.CandleStickForums.com However, ultimate success in picking stocks with the right qualities for long term investing or short term trading requires a combination of fundamental and technical analysis.
www.CandleStickForums.com Understanding the various ratios that describe a stocks performance is important.
www.CandleStickForums.com Understanding how the market is interpreting these ratios requires technical analysis tools such as Candlestick analysis with Candlestick pattern formations.
www.CandleStickForums.com Successful execution when buying stock or selling stock often comes out the best with the use of Candlestick trading tactics
www.CandleStickForums.com Successful ratio investing takes into account cash flow ratios, the price to earnings ratio, the price to sales ratio, the quick ratio, the debt to asset ratio and various risk reward ratios.
www.CandleStickForums.com Successful ratio investing takes into account just what each ratio is capable of telling us and when its information might be misleading.
www.CandleStickForums.com For example, a low price to sales ratio might mean that a stock is underpriced even though its products are selling well.
www.CandleStickForums.com However, the company might have such high expenses that it is not making a profit.
www.CandleStickForums.com In this case a better measure of how well a company is doing might be the price to earnings ratio.
www.CandleStickForums.com In this case both sales/earnings and expenses are taken into account.
www.CandleStickForums.com In either case the point of successful ratio investing is to compare a stock with others in its market sector.
www.CandleStickForums.com Successful ratio investing is picking stocks that are making money but are still under priced.
www.CandleStickForums.com If the earnings can be expected to continue then the intrinsic stock value (a measure of forward looking earnings) is high and the stock may well be a good buy.
www.CandleStickForums.com Successful ratio investing also looks at debt versus company assets.
www.CandleStickForums.com This ratio gives the investor a clear view of how a company will be able to weather an economic downturn or the time it takes to get a new, potentially profitable, product to market.
www.CandleStickForums.com A low debt to asset ratio means good financial health.
www.CandleStickForums.com A high debt to asset ratio is a good reason to avoid a stock as a long term investment.
www.CandleStickForums.com However, it may be a good reason to consider selling puts on the stock in case of a big drop in stock price.
www.CandleStickForums.com Whereas a low debt to asset ratio is part of the margin of safety of long term investing a high ratio is a big warning sign for long term investors.
www.CandleStickForums.com Finding a high debt to asset ratio
www.CandleStickForums.com And following the stock price with Candlestick charting techniques can put the day trader in a position to make substantial profits in short selling just as the larger market catches on and starts to sell the stock.