Knowing about online stock trading is super important in today’s day and age. It can make you financially free and become your second source of income, provided you do it the right way. Selecting the right stocks is the key here. It would help if you did the technical and fundamental analysis of a stock before investing. One needs to check many things before they decide to invest in a stock. You can hire an expert who can do it for you, or you can do it yourself. In this blog, we have explained how you can do the latter as a beginner investing in the stock market.
Technical analysis
When you search for option trading app India, you will find many good investment apps, like mStock. Using the app, you can do a technical analysis of a stock. It says that a company’s financials are not so important to track. Rather, the stock price goes up and down in a specific pattern, and that’s what matters. If you, as an investor, understand this pattern, then you can understand whether you should invest in this stock now and wait for some more time. This is comparatively a smaller part of the stock selection process, and hence, a beginner should not depend fully on this.
Fundamental analysis
There are multiple factors one must consider when doing the fundamental analysis of a stock using mStock or similar apps. Here is a brief explanation of the same.
P/E Ratio:
The price-to-earnings ratio indicates when you should invest in a stock. P indicates the price of the stock, and E indicates the earnings per share. So, if the earnings per share are high compared to the actual price of the stock, then the PE ratio is low. This indicates that the stock is undervalued, and it is the right time to invest or maybe start an SIP investment. You can also compare P/E ratios within the same industry.
P/B Ratio:
The price-to-book ratio, which you find on a trading platform, compares a stock’s market value to its book value. The book value is the value of the company’s assets minus its liabilities, as reported on the balance sheet. A lower P/B ratio may suggest that a stock is undervalued, as investors are paying less for each dollar of assets. However, similar to P/E ratios, it is most useful when comparing companies within the same industry. A low P/B ratio may indicate a potential opportunity for investment.
Debt to Equity Ratio:
The debt-to-equity ratio compares a company’s total debt to its total equity, indicating the proportion of debt used to finance its operations relative to the equity. A lower ratio suggests that a company is less reliant on debt financing, which can be viewed as less risky by investors on an options trading app. A higher ratio, on the other hand, may indicate higher financial risk, as it implies a greater reliance on debt to finance operations.
Current Ratio:
This measures a company’s capability to cover its short-term expenses with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher ratio shows a stronger liquidity position, as the company has more current assets relative to its current liabilities. This suggests that the company is more capable of meeting its short-term obligations. However, a high current ratio may indicate that the company is not using its current assets to generate revenue efficiently. It is important to compare the current ratio with industry averages and historical data to assess the company’s liquidity position accurately.
In conclusion, when you open a zero brokerage Demat account on mStock or elsewhere, value investing is key. You buy stocks at a lesser price than their intrinsic value. Check the balance sheet, future perspective, political support, and founding team. Finally, if foreign investors are increasing their holdings in the company, it’s a good idea to invest in its stocks.