The more your learn, the more you earn.

by Makoy Velasco, Certified Securities Representative
Any views or opinions represented in this blog are personal and belong solely to the columnist and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

In the previous post, we discussed simplifying trading using support and resistance levels. In this post, we’ll show how reading the news can simplify your trading so you can eventually create a system of your own.

Information is money in stock market trading. Try to back test any stock that really went the distance. Chances are people were buying because of certain developments in the company (some were probably just based on rumors). The point is, stock prices move because of supply and demand (buyers vs sellers) and buyers buy and sellers sell because of information, Hence, information is key.

Take NOW as an example. NOW is the most recent superstock in the PSE. It rallied from around P0.60 to as high as P3.50 in no time.

how to invest in the stock market

NOW’s price rallied as it was groomed to become a third major telco player in the Philippines. It may not be as big as PLDT (TEL) and Globe (GLO) but it’s definitely a game changer. NOW announced a pioneering broadband service that will provide high-speed internet access at guaranteed speeds to large enterprises.

Sometimes the news comes out first.

ARA: http://asia.nikkei.com/Business/AC/35-hectare-mixed-use-development-in-the-works

Late last year, there was news about ARA overhauling its property in Cubao to make it a modern commercial and and business hub in the country. This was something big because it would increase the value of ARA’s property value big time, which will increase the value of ARA shares. Below is the movement of ARA’s price a few weeks after the news came out.

how to invest in the stock market

And sometimes, the price moves first (perfect example is NOW).

Either way, prices move up because there is a reason for it to go up. There is a reason for its value to rise.

So what to do in order to take advantage of such developments/news? I recommend three simple steps you can take to use publicly available information to your trading advantage:

[1] Read the news and keep yourself updated and scan charts. It doesn’t matter which of the two you do first.

[2] After reading the news and scanning charts, check the chart if you read anything news-worthy and vise versa – make sure you read the supporting news if you looked at the charts first. For those who are into fundamentals, looking at the charts will enable you to time your entry and exit properly. For those of you who are into technicals or charts, look into the disclosures and try to find out the possible correlation.

[3] If both the news story (of the company) and its price are compelling enough, go for it. Apply what you’ve learned in the previous discussion about buying and selling at resistance. Read about it here: http://www.utradetalk.com/trading-simplified-increase-odds-supports-resistances/

To sum it up, keep yourself updated because information is key. Once you have the information, buy at support and sell on resistance. Through this very simple system, you can assure yourself that your odds in trading will genuinely increase.

Ready to put your knowledge into practice? Start by opening an online stock trading account at www.utradeph.com.  Just click the SIGN UP button or call 892-0991.