How to pick good stocks and when to buy stocks

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The answer is very simple yet it is very tough to master it in the practical realities of the stock market. That said there are generally two types of traders in the stock market. The first kinds have a long investment horizon and the second ones have a short term investment horizon. Each of these types has their own method of finding the best ways to buy the stocks and when to buy the stocks.

Short term horizon

If you are a trader who swears by the short term investment then you should go with the concept called momentum stock investing. In this trading strategy the aim is to find the stocks that are on a continued bull run. You will need to pick the stock when it is just beginning to go on an upward trend. Once you have bought into this stock then sell this stock as and when you have made the targeted percentage of gains. You need not hold this stock for long term gains.

This type of stragey will require large capital outlay as well as continuous monitoring of the stock price. Essentially you are dumping the stock the moment you have made your money.

For short term stock picking the best kind of analysis is the technical analysis.

Long term horizon

If you are a trader who has a long term horizon then you will have to make sure that you buy the shares when they are low and buy more when they are lower. The strategy is to accumulate the shares at each slide. This will make sure that when the stock is on the upswing then you will be able to make good profits. However if you are there for the long term profits then the horizon for holding onto a particular stock will be more than five years and possible ten years.

The key to picking the stock in this strategy is that you should know stock market basics for picking up the right stocks. The best way to pick good stocks at low prices is to use the value investing method. In this method the stocks that have gone down because of some temporary phenomenon or bad market sentiments but have strong balance sheet are considered to be the value picks.

Warrant Buffet, the second richest man in the world has used this value based investment strategy for long and has been known to pick stocks when the market is doing badly. He has definitely used the buy low and sell high strategy to make huge gains in the stock market.

For long terms strategy you need to concentrate on the fundamental analysis of the stock