When is the right to buy

Elliott (12)
Timing the market

So many people often wonder when is the best time to enter a trade they would often say “is now the right time buy” and enter too early or “I need to wait for the right time to buy”, then miss out. We are going to step you though what indictors and analysis you can use to help you time the market.

A Bull market occurs when the stock market has consecutive price Inclines. It is referred to as Bull market because the way bull attack their prey in a upward swipe. 

The economies performance is often measured by stock indices, the most common stock indices is the S&P 500 which refers to the Americas top 500 companies.

Each county has their own stock indices such as the “CAC 40” in France or the “Hang Sang” in Hong Kong. If these indices see a decline it is an indication that that the economic performance of that country might be falling  is falling.

We believe there is currently a huge gap between professional and everyday investors. Where professional investors have access to insights and information that normal investors do not.  We’re here to bridge that gap by providing analysis that is accessible and easy to understand.

X Marks the Spot

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Traders will often use moving averages to determine when its best time to buy a stock. A moving average refers to the when a stock is average over a period of time essentially smoothing out the highs and lows of the trend. In the example above i have used a 20 day moving average (Blue Line) and a 50 day moving average (Red line). The Blue line is the shorter moving average which responds faster then the longer 50 day moving average. 
 
If the short term moving average rises above the long term average it is known as a “golden cross” and signals a bullish buying signal for investors that the stock price may rise as the shorter moving average would always react before the longer moving average. A sell signal can also be identified if the longer 50 day moving average crosses below the shorter 20day moving average this is known as a “death cross”.  I encourage everyone do try this for themselves go to any stock and place a 20 day moving average and a 50 day moving average and see if you can spot the golden crosses or death crosses.

Buy when a stock has been Oversold

Using support and resistance levels can be an additional way that to time the market better. In Particular Indicators like the Relative strength indicator can be used. The Relative Strength Indicator (RSI) detects if a stock is “Overbought” or “Oversold.  The RSI is calculated using average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. A reading of below 30 means the stock is oversold highlighting a bullish signal that the stock might rise in price.   Buying when a stock is oversold could be an additional way to time the market better.  See the Graph as a reference to how the RSI performs.

Using Ratios help determine when to buy.

Price to Earnings Ratio –


The price to earnings ratio is used to determine how much investors are willing to pay for each dollar of company earnings (Net profit). The Price to sales ratio is calculated by dividing the stock price by companies earnings per share. If a company has a high price to earnings ratio it means that investors would pay more for a company’s earnings when compared to other companies. Therefore it is important to note that the lower the price to earnings ratio the more undervalued the stock is. When you use the price to earnings ratio you should only compare stocks that are in the same industry for an accurate result for example dont compare a Tech stocks P/E ratio against a mining companies P/E Ratio. If a stocks P/E ratio is lower than its competitors in the same sector then it would be an indication that the stock is undervalued and a possible time to buy the stock. If you are curious on which sectors are currently performing the best click here.

Price to Sales Ratio

The price to sales ratio is used to determine how much investors are willing to pay for each dollar of company sales. The Price to sales ratio is calculated by dividing the stock price by the underlying company’s sales per share. If a company has a high price to sales ratio it means that investors would pay more for a companies sales when compared to other companies. Therefore it is important to note that the lower the price to sales ratio the more undervalued the stock is. When you use the price to sales ratio you should only compare stocks that are in the same industry for an accurate result for example dont compare a Tech stocks P/S ratio against a mining companies P/S Ratio. If a stocks P/S ratio is lower than its competitors in the same sector then it would be an indication that the stock is undervalued and a possible time to buy the stock. If you are curious on which sectors are currently performing the best click here.

Short Interest Ratio   – 

The Purpose of the short interest ratio is to determine the number of short sellers who are actively shorting a stock. Short sellers are people who believe a stock will fall in price and benefit from the stocks price falling, for more information on shorting click here. If the short interest ratio is high it means that there is a large number of people taking short positions in the stock and is an indicator that the stock may fall in the future. The short interest ratio is calculated by dividing the number of shares that are shorting the stock by the average daily trading volume. Any short interest above 10% is considered high and any short interest below 10% is considered low and an indication that the stock is shorted heavily and my rise in value in the future. 

Using Ratios help determine when to buy.

Price to Earnings Ratio –


The price to earnings ratio is used to determine how much investors are willing to pay for each dollar of company earnings (Net profit). The Price to sales ratio is calculated by dividing the stock price by companies earnings per share. If a company has a high price to earnings ratio it means that investors would pay more for a company’s earnings when compared to other companies. Therefore it is important to note that the lower the price to earnings ratio the more undervalued the stock is. When you use the price to earnings ratio you should only compare stocks that are in the same industry for an accurate result for example dont compare a Tech stocks P/E ratio against a mining companies P/E Ratio. If a stocks P/E ratio is lower than its competitors in the same sector then it would be an indication that the stock is undervalued and a possible time to buy the stock. If you are curious on which sectors are currently performing the best click here.

Price to Sales Ratio

The price to sales ratio is used to determine how much investors are willing to pay for each dollar of company sales. The Price to sales ratio is calculated by dividing the stock price by the underlying company’s sales per share. If a company has a high price to sales ratio it means that investors would pay more for a companies sales when compared to other companies. Therefore it is important to note that the lower the price to sales ratio the more undervalued the stock is. When you use the price to sales ratio you should only compare stocks that are in the same industry for an accurate result for example dont compare a Tech stocks P/S ratio against a mining companies P/S Ratio. If a stocks P/S ratio is lower than its competitors in the same sector then it would be an indication that the stock is undervalued and a possible time to buy the stock. If you are curious on which sectors are currently performing the best click here.

Short Interest Ratio   – 

The Purpose of the short interest ratio is to determine the number of short sellers who are actively shorting a stock. Short sellers are people who believe a stock will fall in price and benefit from the stocks price falling, for more information on shorting click here. If the short interest ratio is high it means that there is a large number of people taking short positions in the stock and is an indicator that the stock may fall in the future. The short interest ratio is calculated by dividing the number of shares that are shorting the stock by the average daily trading volume. Any short interest above 10% is considered high and any short interest below 10% is considered low and an indication that the stock is shorted heavily and my rise in value in the future. 

How to have a professionals trade for you!

Copy Trading has become a popular strategy for investors that are unsure of when to buy and sell at the right times. Traders using copy trading platforms are able to have peace of mind knowing that the tough decision of buying and selling at the right time is looked after by an experienced professional.