It is mind blowing that a public listed company can get valuations that are beyond fundamentals & that's why staticians can't play the stock market. For example, I started studying stock fundamentals, PE was something often mentioned in forums and used to get a hang of whether the stock is expensive or not. The price-to-earnings (P/E) ratio measures a company's share price relative to its earnings per share (EPS). PEG is stock's price-to-earnings (P/E) ratio divided by the growth rate of its earnings for a specified time period. Theoretically, a PEG lower than 1.0 is best, suggesting that a company is relatively undervalued. When I got to know about PEG I tried to apply that concept but it didn't work in making profits. However, it helped get a perspective of the company's stock price valuation relative to other peers. Yet, this was not good enough to start trading.
Over a period of time I have explored many parameters. ROCE, Profit Margin, PAT, Beta, RSI, MACD, ADX, ATR etc. Reading one of the books from Warren Buffet, I realized what makes an investor/trader more confident is his observation of the real world. His notion of what product is doing good, what product is taking off. These observations helps in finding multi-bagger stocks.
Over a period of 20 years, I have realized that one has to be long on their stock trades. This helps derisk in the eventuality of a bear market. There were events such as 2008 stock market crash, covid market crash which caused the stocks to decline by 20-30% over a period of 2-3 months. However, making substantial profits also involves short-term trading. This requires people to understand market sentiments and have good insights into the future of the overall market, company specific sector and the company & competitor specific earnings & growth aspects. Having a 2-3 year view of a company's high-level performance and comparing it with competitors is very important. Keeping weekly tab of stock prices helps to capture gains that one has to wait for a quarter. These kind of gains are derived by swing traders who are ready to take limited risks through stop-loss.
For Stock entry, follow RSI & MACD: Moving average convergence/divergence (MACD) is a technical indicator to help investors identify price trends, measure trend momentum, and identify market entry points for buying or selling. Ensure RSI is above 50 unless you know something about the stock that others don't know.
For Stock exits, follow ATR: ATR is commonly used as an exit method that can be applied no matter how the entry decision is made. One popular technique is known as the "chandelier exit" and was developed by Chuck LeBeau. The chandelier exit places a trailing stop under the highest high the stock has reached since you entered the trade. The distance between the highest high and the stop level is defined as some multiple multiplied by the ATR
