To be good at anything you need knowledge, ability and the tools to be successful. Here are the types of tools you will need to be successful in the stock market:
Technical Analysis Tools
The most important tool for investing in the stock market is a stock chart. In order to conduct proper stock chart analysis and be able to find stock chart patterns, your chart charts should have the following features:
- Daily, Weekly, Monthly and Intra-day time frames (1-, 5-, 10-, 15-, 30- and 60-minute intervals).
- Detailed price and volume data including the 50 and 200 Day Moving Average Lines
- Customizable moving average lines (simple and exponential)
- 50-day moving average volume lines
- A Relative Strength line and ratings
A few other features that make the job easier are:
- Real-time price data, or real-time reference data like the data provided by the BATS Exchange Pattern recognition software
- An S&P 500 Index Line plotted on stock charts for comparisons
- A change date feature (So you can view chart activity for a particular date in a stock’s history or to compare two stocks within a specific time frame.)
- Comparison charts (So you can compare two stocks or indexes within the same chart scale.)
- The ability to draw chart markups or annotations
- A track-price tool that displays on click: the date, high price, low price, last price, price percent change, volume, and volume percent change relative to the 50 day moving average volume.
Fundamental Analysis Tools
To conduct fundamental analysis you need to be able to dive deep into company information and really get to know the strength and weaknesses in their story. The best stock market research tools will consolidate the necessary company information in a quick, easy-to-use format that also incorporates stock chart data. When evaluating fundamental analysis tools, make sure they are providing:
Basic company information: business description, recent news, ticker symbol, exchange, industry group etc
Important company historical events like IPO date, new CEOs, dividend dates etc
Earnings Estimates and Historical Annual EPS
Quarterly earnings and sales data
Financial margins and ratios like Return on Equity, profit margins, price to earnings etc.
Industry Groups Analysis Tools
Having tools to help you spot industry group trends and know which specific groups are leading the cycle is vital to your stock selection. In every bull market, certain areas of the economy experience tremendous growth, and as a result, attract a lot of attention from Wall Street.
Studies have shown that roughly one-third of a stock’s move can be related to its industry group. Keep in mind, the industry that leads in one bull market will often be different from the one leading the next bull market. It is critical to identify which industries have the most potential to benefit in the next bull market. Tools that categorize stocks based on industry and report on the relative performance on these industries will help you focus in on the stocks most likely to appreciate in price. Just as you would review the technical strengths of individual stock charts, the same type of analysis can be done on a chart of the entire industry.
Institutional Sponsorship Analysis Tools
Gauging institutional sponsorship is also a key step in the analysis of individual stocks. It takes big demand to move a stock’s price higher, and that demand comes from institutional investors like mutual funds and hedge funds. Your research tools should tell you if an increasing number of funds own your stock. You should also be able to verify that some of the best-performing fund managers own it.
For example, in evaluating Michael Kors (KORS) above, there are 481 funds that have a position in KORS as of the most recent reporting period. That’s an increase of 153 funds from this time last year. This should give you added conviction that there is growing institutional interest in the stock.
The percent of shares held and the percent of fund assets gives you a basic idea of whether these funds are accumulating a new position. For example, Fidelity Magellan Fund doesn’t likely consider a position in KORS of 0.03% of assets a full position. If KORS were to go up tenfold it wouldn’t affect the fund’s performance. Although we cannot know for sure, it seems likely that in this scenario, the Magellan manager is building a position in KORS. He might eventually want to take that position to 4—5% of fund assets, and his steady buying of this stock will be an important factor in any potential price appreciation.
Research Routine Tools
Research routine tools help you tie all of the other kinds of tools together. Having powerful tools to conduct research is important, but routine tools help you work efficiently and save you time. The best research routine tools integrate many types of tools into a single platform that enables you to quickly find ideas, analyze those ideas, and manage them all in one place. Some tools that you should consider that will help you with your research workflow include:
- Screening tools
- Customizable checklists
- Chart markup tools
- A digital trading journal
- Stock price alerts
- Portfolio management tools
View more information: https://marketsmith.investors.com/stock-market/stock-market-research-tools/