Avoiding cheap stocks and choosing stocks with strong trends is the first factor of selecting stocks


Edward Weston

Apr 17, 2021

Experienced speculators often make abig mistakeofbuying thecheap stocks in,just becausetheprices are low. Although in some cases, driven by the buying demand, the stock price may rise from 5 or 10 dollars to more than 100 dollars, most of these low-priced stocks will soon be listed in the liquidation management and forgotten by the world. Otherwise, it can only survive year after year, and the shareholders' hope of returning the capital is very slim. Towhattheinvestors are concerned, the most important task ofselectingstocksis to find out the most promising industrial stocks and distinguish which ones are the most powerful and which ones are not so strong, weakeror quite weakand so on. Speculators should not plunge into the cheap stocks of depressed industries just because they look cheap. Focus on healthy and strong industrial stocks.

Set the daily profit target, calculate the risk relative reward in advance, and you can only make money by sellingatthe pointwheresuccesscanbeensured

I am very concerned about the ratio between potential profit and investment amount. If I have to spend 200 dollars to buy a stock, I expect it to rise by 10% or20% ormore. I estimate that I will have to spend $200,000 to make $20,000. This investment is not so attractive to me because the relative rate of returningfor its risk is uneven. No matter how good an operator you are, it is inevitable to lose in the stock market, and you must include it as part of the operating cost, together with interest, brokerage fees and capital gains tax. Frommy personal experience, few investors have calculated the risk-return rate before starting a transaction. It's important to try to do it, but make sure you have a detailed plan.


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