If you’re looking to invest in the stock market but don’t know where to start, here’s a novel idea: Why not look at some of the biggest losers in the market over the past few years, and try to find a pattern or trend that you can use to your advantage? You can then use a technical analysis tool like MetaTrader 4 or 5 to get an idea of how others perceive the current state of the market, and whether or not their perception matches yours.
Short-Term Trends
It’s well-established that the stock market is a major generator of wealth for investors. Over the long term, investing in stocks can be extremely rewarding, but for those who lack the time to wait for long-term trends to emerge, there are alternatives. For example, short-term trends can help pinpoint undervalued stocks that are likely to appreciate in value over the next few months or years. One of the simplest and most effective ways of identifying such short-term trends is to look at the biggest losers in the market over the last few years and try to find patterns or themes that recur. Let’s have a look, shall we?
Long-Term Trends
Although stocks can vary widely in price from day to day, they tend to follow fairly clear long-term trends that can be easily identified. The most popular long-term trend in the market today is the rise of the small-cap stock. Simply put, small-cap stocks are those that trade at a significant discount to their larger counterparts. Typically, a stock will trade at a discount to its own historical performance if it’s not paying attention to the market or otherwise not ‘acting’ like a stock. Examples of small-cap stocks include Facebook, Apple, and Pinterest, to name but a few. The reason these stocks are considered small-cap is because they’re typically valued much more highly than you’d expect for a company of its size. It’s difficult to pinpoint exactly what drives the market’s inflation of small-cap stocks, but there are a few potential causes. One of the most obvious is that investors are attracted to the relatively high dividends that are paid by many small-cap stocks. Another possible contributor is the practice of frequent ‘buy-ins’ by individuals looking to make a quick profit. These practices lead to massive market ‘frothings’ when large numbers of individuals or brokers decide to enter the market at the same time. The final piece of the puzzle is the constant presence of new investors who are willing to risk small amounts on the chance of significant gains. When large numbers of individuals or institutions get together and place large bets on the same side of the market, it tends to have a domino effect and cause prices to rise sharply. When that same group of investors gets nervous and starts to take profits, the market can quickly correct itself and end up in a state of disarray. It’s important to note here that although large-scale trends can emerge as a result of these short-term trends, the opposite is not always the case. Sometimes, large-scale trends can actually be a result of short-term over-valuations. This is why it’s important to keep an eye on the long term, as well as the short.
What About The Man Behind The Loss?
One of the things that technical analysis tools like MetaTrader 4 and 5 can easily identify is the identity of the person or group behind a stock’s price movements. For example, take a look at QVC, which is one of the stocks mentioned above. QVC is a retailer of women’s clothing and accessories. As we can see from the graph below, the large-scale rise in QVC’s price that began in 2013 was initially driven by a small number of individuals or groups. However, the majority of positions held by these individuals or groups were soon bought and/or sold by other parties, which caused the initial speculators to ‘cover’ their positions. In a nutshell, this is what happens when a relatively small number of individuals or groups drive a stock’s price significantly higher than justified by the stock’s current performance and by its long-term trend. In the case of QVC, the reason for its extreme rise can be attributed to a combination of aggressive promotion by stock promoters and a small number of influential investors who saw the potential in the retail clothing industry.
Using MetaTrader 4 Or 5 To Identify Undervalued Stocks
So, if you’re looking to invest in the stock market with the aim of making large profits, you’ll naturally want to avoid investing in stocks that are highly valued. Fortunately, you don’t have to. As we’ve established, many small-cap stocks have a significantly higher than normal price simply due to the active short-term speculation that characterizes the market. However, these same small-cap stocks often have significant investment potential and can be highly rewarding to those who take the time to study their performance and look for long-term trends. For example, take a look at PureCoat Pet Foods, which is an undervalued dog food manufacturer that’s currently trading at a 15% discount to its long-term trend. Although PetFood is not an easy investment to understand, those who have studied and tracked its performance over the long term have seen a steady and promising future. Indeed, the reason PureCoat is so attractive to patient investors is because it has maintained a relatively stable price despite significant industry competition and the general decline in the market over the past year. In other words, its price is not inflated by short-term speculation or ‘froth’, which makes it a great investment for those wanting to enter the market at a moderate price.
The Example Of ZoomVideo
ZoomVideo is a manufacturer and marketer of multimedia and telecommunication products. Similar to PureCoat, ZoomVideo has a highly innovative product and a steady track record of success. However, given its size and market dominance, it commands a significantly higher price than PureCoat. It’s currently trading at a 49% discount to its long-term trend, which makes it a significantly more attractive investment opportunity. This is likely because ZoomVideo is a bigger company with far more resources at its disposal. Like PureCoat, ZoomVideo has a promising future due to its steady price and sustainable earnings. Moreover, similar to QVC, here too there is evidence of stock hype and overpricing due to speculation. ZoomVideo’s price is currently inflated by speculators who bought the stock at significantly higher prices than its long-term trend. In the near future, these same individuals and groups will likely begin to take profits, which will cause the price of ZoomVideo to decline. However, this decline will likely be more moderate than that of QVC, which will make it easier for long-term investors to take advantage of the situation and realize a significant profit. Overall, small-cap stocks are a great way to enter the market and make profits; all you need is a little courage and a lot of patience.