Share trading is all about buying shares at a low price and selling them when their prices go up. For the investors, finding the stock to purchase is one of the most fun and rewarding activities. If you know what to look for, trading in shares can be quite lucrative. You also need to understand that this is a very risky business. The price of your shares can go down tremendously within a day, thus causing you to losea lot of money. Below are important tips you should use when identifying stocks that have a good chance of making you good money.

When new stock goes on sale:

Provided you have done adequate research on a company, the best time to purchase their shares is immediately after the initial public offer (IPO). When a company goes public, their share prices are low. This is done to encourage more people to invest. This is the best time to buy shares. All you need to do is make sure that the company has a good management and has been progressing well over the years it has been in business.

When shares hit your buy price:

It is good to have a budget when investing in shares. Dig deeper to know exactly how much a stock is worth. You should then wait until the stock gets to your buy price to invest in it. Your buy price should not be a single stock price but rather a price range. Don’t ignore analyst reports. They are good for determining the starting point. You can start your research at the Share Prices Australia. This is a website that gives detailed information about stocks. You will get a ton of information which includes the latest news and information on the top gainers as well as top losers.

When it is undervalued:

A lot of information is needed to determine a price target range. Your goal when evaluating a stock is to determine if the stock is undervalued. The best way to do this is by taking a look at the level of overvaluation or undervaluation of the company’s future prospects. Make use of the discounted cash flow analysis. When a stock is undervalued, its price will be low. The price will however be revised quickly within days or even hours. You need to purchase such stocks before the price goes up.

When you can hold it patiently:

If, for example, you have identified undervalued stocks and feel the price will go even lower, it is a good idea to hold back. The case is the same when considering undervalued stocks that may not go up for months or even years. If you can hold a stock, invest in the undervalued stocks. Only do this if you have confidence in the stock’s value going up.

The rule of thumb when it comes to investing in stocks is to always do your homework. Invest like the pros. Warren Buffet, for example, digs deeper into the company he is investing in as though he is planning to buy it. You should do the same.

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