5 Tips for Timing Your Stock Purchases for Maximum Gains

Finding the right stock to buy for maximum gains can be one of the most fun parts of trading, especially if you are new to the game and find the initial purchases you made start to go up. Stocks that increase in price after you buy them are very lucrative for short-term traders. If you’re looking to invest and you’re curious which stocks you should buy, follow these tips to help pick winners.

Buy Low

Investors tend to take the herd mentality approach to investing when a stock’s price is low, avoiding buying it. However, that’s counter-intuitive to anyone who wants to ride the wave back up. Investors are always afraid that downward price trends mean the stock will be worth less than when they bought it. Determining whether that’s true or not depends on why the stock price is down. Analyzing the news can help you determine if the stock is temporarily on sale because of bad news.

Have A Buy Price Range

When researching a stock that you’re interested in buying, have a value in mind that is your buy price. Establishing a range of prices will help you decide of you should jump in or not. Analyst reports can help you make this call, but you should also look at consensus price targets. These are an average of analyst opinions and can provide a good estimate for when a stock is worth buying.

Undervalued Stocks Are Gold

Finding undervalued stocks is the thrill on which swing traders ride. After finding an established price range, you can determine whether or not the stock is over or undervalued. Looking at the company’s cash flow analysis and future projected cash flows can help you determine this. Stocks to buy now should be undervalued stocks that are likely to rise in value in the future.

Due Diligence

If you’ve done your own research surrounding a company and the fundamentals or technical analysis looks good, then trusting your gut is probably a good option. A company’s annual report and reading the news surrounding the company is an excellent place to start. Most companies keep an investor relations page on their corporate website to help investors make these decisions

Know When to Hold ‘Em

Like Kenny Rogers, once you’ve bought a stock you’ve got to know when to hold it and when to sell it. You can find a price range in which you’re comfortable with selling the stock, but you shouldn’t expect that value to appear any time soon. Analysts typically make their price predictions over the next month or through the quarter, so keep that in mind when using them to establish your price ranges. Sometimes it can take a couple of years for a stock to appreciate to the price target.

Conclusion

Overall, it’s pretty clear that doing your due diligence surrounding a company before investing is always your best bet. If you’re planning on making shorter-term trades to turn a profit, consider learning some swing trading or day trading strategies to make profits quickly.