Wednesday 20 April 2022Initial knowledge about the world of stock investment, can start from basic knowledge, namely when to buy and when to sell shares. This time, we will discuss the strategy of buying and selling stocks, of course including important strategies for mitigating the risk of loss in stock investment.
First, when is the right time to buy shares? Regarding the exact time, it can actually be seen from two things, namely based on fundamental and technical analysis. Fundamental analysis refers to analysis through an approach to economic conditions, politics, or even looking at the trend of existing business developments. One of these analyzes can be seen from the financial statements.
Meanwhile, technical analysis is stock analysis through an approach to the movement of the stock itself over a period of time, including prices and fluctuations, as well as information about the highest and lowest points of a stock. Keep in mind, the price here is not just a cheap price, yes, but the stock price of a company that is worth buying.
Furthermore, there are things that we need to pay attention to before buying shares, including the profile and level of company liquidity, fluctuations in the Composite Stock Price Index (JCI), market trends, Return of Equity (ROE) or profit from shareholders investment in the company, sales or sales, and earning per share (EPS) growth.
Of course, apart from paying attention to the points above, strategy is also important.
Three 3 strategies in buying stocks
1. Buy On Weakness, namely buying when the stock price has dropped to a certain level that is safe to buy.
2. Buy If/On Breakout, namely buying when the stock price manages to break a certain level or rises through resistance (its highest level).
3. Buy on Retracement, namely buying shares after a breakout or price bottom occurs. Stocks that successfully breakout generally will immediately experience a high increase.
Now, we also have to know, when is the right time to sell our shares.
The right time to determine when to sell shares is of course when the price is rising or also called profit taking. But, what if the price drops? Well, the right time to sell shares is to set a cut loss.
Cut Loss is the term used when we sell a stock at a price lower than the purchase price, so we experience a loss. The existence of this cut loss is not to realize the loss. But precisely to prevent even greater losses when the price of the stock you hold continues to decline.
For example, when you have set a cut loss limit at 5% or 7%, then when the loss has reached that number, you can immediately sell the shares you have.
Cut loss itself is recommended to be carried out by investors and traders in order to maintain the capital they have, Friend Attitude. The time to carry out a cut loss also varies, depending on your position as a trader or investor.
Tips
For those of you who are active traders, if the stock you are holding will continue to fall, it is better to cut your loss immediately. The key here is to try to find out the direction of the movement of the stock, whether it will go up, down, or sideways in less than a year or less than a few months depending on your trading period.
For those of you whose position is as an investor, then a cut loss can be done when there is a fundamental change that can be seen from the company's fundamental performance. Several things can be used as reasons why you should make a cut loss, namely when there is bad news related to the company in question and or if there is a decline in the JCI.
There are two ways that can be used as a benchmark in determining the cut loss point of a stock, namely based on the purchase price and based on the support point. The support point itself is a price level or area that is believed to be the lowest point.
If based on the purchase price you have set a cut loss limit from the beginning of 5% or 7% as shown above, this method is considered less flexible because it does not consider the prospect of future stock price movements.
Meanwhile, it is different with benchmarks based on support points, cut loss limits can be set by looking at daily stock recommendations that are usually sent by securities. This method is considered more flexible because it follows the movement of rising and falling stock prices without setting it first.
Those are some strategies and tips that you can apply in playing stocks.
Keep in mind, all types of investment must have risks. The risk comes from not knowing what you are doing." or the risk comes when you don't know what you are doing. Understand the types of investments and how they work. From here you will understand what you have to do and can reduce or even avoid losses.
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