The key to becoming a successful trader is to accurately anticipate stock market movement. Experienced traders do this through a number of methods, one of which is interpreting stock signals. Based on the signals and other detailed analysis, experienced traders attempt to predict the hot stocks to buy.
Nothing can beat experience when it comes to successfully navigating the stock market, and buying and selling stocks in a way that maximizes return on investment. But, interpreting stock signals correctly can help you find the hot stocks to buy even if you are only just beginning to explore the market and trading stocks.
Many Web sites are available to view stock charts and analyze data that might help beginning traders make decisions about what stocks to buy. Barchart.com is one such Web site, and has even developed a tool called “TrendSpotter” – a computerized trend analysis system that utilizes a combination of wave theory, market momentum and volatility in an attempt to find a general trend for a specific market. TrendSpotter analyzes a stock using thirteen popular analytics in short-, medium- and long-term periods. The results of this analysis are interpreted as Buy, Sell, or Hold signals. Each signal is given a numerical rating and a percentage to buy or sell. These signals are posted on Barchart’s site and updated regularly.
Let’s take a closer look at the analysis tools used by TrendSpotter:
1. Wave theory was developed by Ralph Nelson Elliott in the late 1920s. Elliott discovered that stock markets, which were then thought to behave in a chaotic manner, actually traded in repetitive cycles, which resulted from investors’ reactions to outside influences. Elliott found that the upward and downward swings of the mass psychology showed up in the same repetitive undulating patterns, which he termed waves.
2. Market momentum is a measure of overall market sentiment. Market momentum looks at changes in price as well as changes in volume. Price movements, then, are said to have more momentum if they also occurred in conjunction with heavy trading volume.
3. Volatility is a measure for variation of price of a financial instrument over time.
Other analytics used by Barchart to generate stock signals include 20-day average, 50-day average volume, 100-day average volume, and more. Results from the analysis of these indicators are also used to generate Buy, Sell or Hold signals. Using these stock signals, traders can make predictions and determine what they believe to be the hot stocks buy.