How do I buy and sell trade
How are stocks traded?
There are many other things to analyze in an earnings report, including cash flow, EBITDA, or other metrics like customer growth. Therefore, it's often best to read as much stock news as you can - especially anything related to earnings for companies you want to trade - and gauge what to look for from there.
You should also watch out for news outside of the reports. For example, a new product announcement could have a significant impact on the stock price between earnings releases.
Fundamental analysis, however, does not just mean assessing a company's earnings reports and news. It takes a holistic approach to assessing the value of a stock, taking into account factors that are beyond the control of the company and could affect financial success.
For example, the economic situation in which a company operates affects its future growth. Economic expansion usually has a positive impact on business. Hence, strong macro data like GDP, PMI, or retail sales can increase demand for stocks and cause stock prices to rise.
Interest ratescan also play a major role. When interest rates are high, investors don't need to take huge risks to get healthy returns, which can put a damper on the stock market. So if it looks like a central bank is raising interest rates, the demand for stocks could fall.
Ultimately, the trends in individual sectors affect the prices of the main players. For example, if the demand for oil falls, watch out for price declines at large oil companies.
As with earnings reports, there are many factors to consider when evaluating how external factors can cause demand for a stock to rise or fall.
Stock price movements are not always based on fundamental analysis. The view that traders and investors have on a particular stock can also cause demand to fluctuate with little current data.
For example, suppose a major investor in a mid-cap stock decides that they want to sell their stock for reasons unrelated to the company's financial performance or external factors. Other traders may get scared and decide to follow suit - they believe the stock is on the way down and that the investor knows something they don't.
The rise in automated trading and technical analysis can make sentiment an even stronger factor in determining stock price performance as algorithms and traders identify the beginnings of a trend and buy or sell accordingly, which amplifies the movement.
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