How to choose a share

You may wonder how to choose a share…First of all it helps if you know what market you are going to buy shares from, then you can start picking shares from your chosen market.

Traders go through two main processes when choosing shares. These processes are called fundamental and technical analysis.

Fundamental analysis

Fundamental analysis is about evaluating companies financial health. This is an important stage in picking a stock. Simply put, you do not want to be buying shares in companies who are making losses as their share price is very likely to go down.

Read more on fundamental analysis.

Technical analysis

Technical analysis is the analysis of a company’s stock performance through the use of stock price charts. Technical analysis involves studying chart patterns, technical indicators and resistance lines to find out whether a stock is likely to rise or fall.

Countless studies have been undertaken on technical analysis to find the most profitable chart patterns, thus resulting in courses, books and e-books, which all offer you technical analysis techniques and strategies for making regular consistent profits.

Note: Technical analysis is not often used by long term investors as they are interested in the long term price movement of a stock, not the short term price patterns. Find out more about different styles of trading.

Read more on technical analysis.

The reason for going through these two processes is to gage the long term (fundamental) and short term (technical) prospects of a stock. If both fundamental analysis and technical analysis point in the right direction then it likely to be a good time to enter the stock trade.

We strongly recommend you take a course in trading shares before trading with real money, read why.

To help with fundamental and technical analysis there are stock market fantasy trading accounts which provide screening (fundamental analysis) and trading software that provide charting facilities (technical analysis).