Buying and selling are basically the only two processes in stock trading. That's the simple stuff. It's tough to figure out just when to do them. Trading is a never-ending game of trying to figure out when the optimum moment is to purchase (or sell) stocks, no matter how skilled you are. Even though many people reject it, following a few simple guidelines may lower your risks while increasing your chances of success. Knowing when to enter is as important as knowing when to exit. Keep reading to find out about a few entry and exit points according to experts.
Entry points as per experts’ opinion
● price movements
When looking for an entry point, you want to find a place where momentum is going up but hasn’t yet reached its peak. Price lines that are going up, especially moving averages, are signs of “support” in the market. As long as prices go down a little from day to day, as long as they don’t go down too much for too long, there will be support.
● P/E ratio of Nifty
A P/E ratio is the ratio of a stock’s market value to its earnings per share. If the P/E ratio is high, it means that the stock is worth more than it makes. If the P/E ratio is 24, it means that, as an investor, I am willing to pay Rs 24 for every rupee the company makes. In short, it is more than what the company earns. I found that there was a very strong link between the P/E ratio of Nifty and how the market moved. When the P/E of the Nifty goes over 24, there is a very high chance that the market will go down. This means that prices are very high. On the other hand, there is a good chance that the Nifty will go up when P/E is less than 16.
● P/B Ratio of Nifty
Another important factor for investing in stocks is the P/B ratio. In simple terms, the book value of a company is the value of all of its assets. In other words, what is the real value of the company or stock, according to the company? For example, the book value of my company is Rs 100, but my stock is trading at Rs 200. So, the ratio of P to B is 2. In short, the stock price is too high. Value investing says that you should buy a stock when P/B is 0.8, which means that the stock is underpriced. At the index level, it is not possible in the real world.
● Trading volume
Another way to figure out when to buy a stock is to look at how many people are buying and selling it right now. When there are a lot of trades and the price of the stock goes up, that’s about as close as you can get before the profit margin goes away. When the number of trades is high and the price of the stock is going down, it’s clear that a lot of people are selling their shares. In this situation, it’s probably time to cash out, especially if you’ve made money from the stock.
● Crossover with two moving averages
A common way to figure out when to buy and sell is to watch two different sets of moving averages, like a 20-day MA and a 100-day MA, and act when the shorter-term MA crosses the longer-term MA. The longer the MA, the more stable the pattern is. Its ups and downs are usually very small. The shorter MA is a little bit more likely to change. Investors think that when a shorter MA that is moving up crosses over a longer MA that is moving down, it is a sign to get into the position. On the other hand, it’s time to get out of a trade when the shorter MA crosses down and goes south of the longer MA.
● Continuation patterns
A continuation pattern is a series of price moves up and down right after a big move up or down. They are used to timing when to buy or sell a stock in the hopes that it will eventually go back to its original trajectory. The “flag” and “pennant” are two of the most well-known patterns. If a stock goes down very quickly and sharply, there may be a time when trading goes up and down. You need to understand most powerful candlestick chart patterns
Exit points as per experts’ opinion
● Your stock's fundamentals start to decline.
You can sell your stock if the main things about your company have changed. If the company's foundation keeps getting worse, the company's profits and revenue will also keep going down. This usually happens when the company doesn't have anything new or different to offer.
● If you come across a better stock,
When you find a stock with better fundamentals than the one you're currently holding, it's an excellent time to sell the one you're currently holding. This also means that the company is getting better and making better products or services that can take advantage of better chances.
● When a company has become too expensive in a short amount of time
In general, the share price of a company that does well can go up over time. But you should sell it if the price goes up too much from where you bought it in a short time.
● Stop-loss order
A stop loss order works the same way as a limit order, but it is used for stocks that are going to lose money. You tell your brokerage to sell your shares when they drop to a certain level, so you can stop losing money. It’s a way to protect yourself from significant losses.
A trade begins when you take a position. You acquire security, keep an eye on it, and hope it appreciates. When the stock price is lucrative, you can choose to sell your shares or hold them in the hope of future profits. Entry and exit plans can be hard to figure out. However, experts suggest developing an entry and exit strategy as early as possible.