How to Analyze Stocks for Beginners

Investing in the stock market or in shares is not an easy job. It involves a complete understanding of how market works and how shares are evaluated. Even experts are unable to effectively analyse the market movements, and for beginners this task is even more difficult. Having a look at the macroeconomic indicators of the country is one that influence the market’s movement, but understanding the actual share price of a company and affecting factors is another job altogether.

There are some basic principles or steps, following them a beginner can analyse the stocks or shares. For example, the person should have the information about the company in which they intends to invest. He can also look at the company’s share price movement for a certain period of time in the past and its total capitalization in the market.

Although you do need to be an expert to analyse the stocks you intend to invest in, having all the required information beforehand can protect your capital from quick erosion and prevent you from suffering quick loss.


  • 1

    Information About Company

    The first step to invest in the shares of a company is to have all the information about that company, its business, its products and services, its annual sales, its consumer market share and its local and international operations.

  • 2

    Market Capitalization

    Next you need to know is market capitalization. It can be the overall capitalization of the market and capitalization of the company which share you are going to buy. You can take out an average of the company's market capitalization in the overall market capitalization.

  • 3

    Valuation Ratio

    Another way is to know valuation ratio. It can help you determine the market strength of the company, and future direction it can take. Although it depends on the overall market behavior, which is affected by the country's economic indicators, the company's business itself can affect its share price also.

  • 4

    Look for IPOs

    If you are unable to decide when you should start investing in the market, then look for Initial Public Offerings (IPOs). You can get shares at discount rate, and it is the best way to start investing in the shares in the market, and then you gradually can immerse into the trading environment as your market knowledge develops.

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