Identifying When to buy or sell a stock

Identifying When to Buy or Sell A Stock

Investing in stocks can be considered a quite challenging task. This is because a lot of information investors need to gather before starting investing in the stock market. Maybe building a portfolio or the selection of the right stock, share market trading is not as easy as it seems to be.

Selection of the right stock with the right amount can often turn out to be a successful deal as it allows investors to earn a huge profit in the long run. Buying and selling of stocks are equally important as buying, selling of the stocks at the appropriate time can be equally rewarding which in turn make investors earn maximum returns from it.

Investment in the stock market is a sensitive task as investing in the wrong stock can lead to huge losses which may take years to break even.

Do remember that the stock market is full of volatility, uncertainty. Therefore, one should be clear about all the aspects of a stock market. The stock market is not for the people who fear the ups and downs of the stock market. It is for those who have patience and can take risks in the long term.

There is massive information available in the market. Anyone who wants to invest in the stock market, can study stock and decide between buying and selling.

How to Identify Trading Stocks?

1. Volume:

It is extremely important to identify the change in volume of the stock. If you notice any sudden fluctuation in stock’s volume and its price, then it should be on your radar.

If you identify any stock price’s movement such as an upward or downward trend, you need to clearly monitor the stock’s fluctuations and observe the pattern. However, it is also said that don’t go with the first day rise in the stock price as the first-day rise may be a fluke.

It is important to identify the trend first. Many analysts take an aggressive approach by monitoring the stocks if there is an increase in the stock price for 2 consecutive days.

In case, where you are sure of stock performance like IRCTC, then you can consider a sharp dig as a stock trading opportunity. Besides, considering delivery-based volume, you should consider a minimum of 5 days average volume.

Also, you can do one thing, you should filter out stocks that are thinly traded i.e traded volume for comparison purposes less than 5 lakhs.

2. Select the company or industry with which you are familiar:

Analysts said that it would be feasible to invest in such stocks that you may gain interest in. This is because investing in such stocks will help you to get better-informed decisions.

Also, industry-specific stocks will make you more interested and therefore you know all the information associated with the stocks which in turn makes it easy for you to identify the fundamentals of a stock.

Hence, it is advisable to invest in stocks that you are familiar with.

3. Avoid Circuit Stocks

Circuit stocks are the ones that are hitting upper or lower circuits frequently. Research analysts believe that circuit stocks should be avoided as much as you can.

It is a misconception that you will earn a huge profit in upper circuit stocks. A majority of small investors made huge mistakes by putting their money in the upper circuit stocks. If you want to extract money from such stocks, then you should be a seasoned trader and know how to play in the stock market.

4. Avoid Only Buyers/Only Seller Stocks

You may observe the stocks with a huge number of buyers. Such stocks may have only buyers or sellers. This doesn’t mean that the stocks have a huge demand. It might be an operator driven stock. Therefore, it is advisable to avoid such stocks.

5. Evaluate Valuation and Price of a Stock

Before picking any stock, it is important to go through the valuation and price of the stock. If the company is trading at PE multiples of less than 20, then the stocks are considered as an undervalued stock and hence a good buy.

On the flip side, a company trading at PE multiples of more than 20, then it is considered overvalued and hence good to sell.

6. Seeking Margins

Mainly companies survive by selling their products and services in the market. If the sales or margin of the company are increasing at a good pace, then there is a good potential rise in the price of a stock in future. It is suggested to always look for the margins of the company. Don’t forget to compare the cost of goods sold and other expenses for the increase in sales.

7. Technical Indicators

Nowadays, technical indicators have been gaining huge popularity. They are basically in the form of charts that predict the future moment of the stock based on the current stock price.

The technical indicators take into account the volume traded. The information provided by technical indicators can be quite valuable while considering buying and selling of shares.

8. Examine Financial Reports

It is good to go through the financial reports of the company before making any decision regarding stock. Financial reports enable investors to analyze the performance of a company. Besides you can also compare the stock’s profitability in the past five years. Also, look for cash pay-outs for stock investors in the form of dividends. The above points help you to decide whether to buy or sell the stocks.


Any upcoming event regarding a company can lead to several triggers in the price movements of a stock. It is important to analyze and knows the events as it helps you to determine the trend of the stock such as which stock going forward.

Therefore, buying and selling of stock can be initiated based on such events, for which you need a trusted stock broking firm with a solid track record and a dedicated team of researchers and analysts.

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