Most of the traders and investors are looking for tips and recommendations all the time to make money in the stock market. One of the pressing question they have “best stock to invest in right now”. Below we will discuss top 5 tips on stock selection. If any trader would follow these tips religiously then they can set themselves on the path of profitability.
Table of Contents
Pick those stocks that have momentum in them
Well it’s not correct to jump on a stocks without knowing what kind of investment you want to do as an investor / trader. Whether you are a short term trader, swing trader or long term value investor or short term momentum investor. This will be determined based on the question – ‘How much time does an investor can hold an investment’. If the horizon of holding a stock is years together then its long term investing. However if idea is to pick up the stock and book profit or loss once target achieved with days to weeks, then they may be swing trader or short term trader or even momentum trader.
Based on the type of trader / investor one is, they need to identify stocks. A momentum investor, short term investor and swing trader may choose those stocks that have momentum in them or not. Stocks that are having Sentiments in bullish zone on multi week to multi months timeframe would be ideally falling in the category of momentum stocks.
Pick those stocks that have no or low promoters pledging
This is a very important point specially for long term investor, value investors perspective. Generally it creates doubt in the mind of investor specially smart money, when a promoter has to pledge their equity to raise capital for their business. Besides, there is another important point behind these stocks specially from bear cartel perspective! Companies whose promoters have large number of stocks pledged with banks and other institutions to raise capital, then these stocks become vulnerable. The loan amount raised would be at the current value of the company. However, if value starts falling then these institutions would prefer to drop them in the market. That would kick additional bearish move with very high momentum. Such vulnerability doesn’t allow small retail investors to exit their holdings easily specially when stock is hitting lower circuits.
Pick those stocks that have positive sentiments as per Sentiments Decoder
This is a very simple approach! Check stocks that have positive sentiments across time frame, weekly to multi week to multi months view. If stocks are having positive sentiments that could help investors to ride the bullish wave. Ultimately, as per the Sentiments Decoder such stocks are building bullish market structure. They may be volatile however one of the role played by Sentiments Decoder is to cut through volatility and build stable view. Though this hasn’t been always possible, but still in large cap it does give stable sentiments view on a stock.
Pick those stocks that have high liquidity, higher free float
It’s very important to touch upon the concept of liquidity. Lower the liquidity or free float of the stock in the market, higher the chances of manipulating that stock by operators. Such stocks may show positive sentiments, may show momentum but at any point it can be proved that all that momentum, positive sentiments were just illusion created by stock operator. When retail demand would start increasing, at that time operators will start exiting their position and handover the vulnerable stock in the hands of retail investors.
These are the stocks that creates lower circuits, sharp falls and erodes retail investors / traders wealth in hours to days time! So be very very careful with low liquidity and lower free float stocks. One of the easy criteria of finding stocks that have low liquidity – they will not form candle sticks! They will typically be flat line as shown in the picture, inside orange circle! If Stocks are making such flat lines then liquidity is low in such stocks.
Most Important avoid stocks that are under surveillance
Yes, every day there are list of stocks which are coming under scrutiny of SEBI, NSE, BSE for some or other reason. They may be under suspicion of some kind of fraud etc. Such stocks should be avoided from getting picked up! They are good stocks, bad stocks, large cap, mid cap or small cap – doesn’t matter. Just stay away from such stocks. For details on Graded Surveillance measures check NSE website. Similarly there is ASM, additional surveillance measures under which companies are under scrutiny by SEBI and other entities. The list of stocks under ASM and GSM are easily available in the respective links.
Conclusion
In conclusion, best stock to invest right now in India would be the one that follow above top 5 criteria. After that also there will be plenty of options ahead of the trader and investor to pick up the right one! But If above top 5 tips are followed, then a trader and investor can save himself from eroding their hard earned wealth. Remember, investing in stock market is subject to market risk. Also never ever fall for past performance of any stock. It may or may not continue to give same performance. If genuinely a stock is having lot of demand from institutional investors / smart money, and then definitely find the one having opportunity to invest while stock is having positive sentiment and not negative sentiments.