Profitable Profit to Earnings Ratio Trading


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Profitable profit to earnings ratio trading gets you into profitable mid-term trades and gets you out after the market wakes up to a stock’s promise.

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Profitable Profit to Earnings Ratio Trading

  1. 1. Profitable Profit to EarningsRatio TradingBy:
  2. 2. A tried and true tool for long terminvesting is the profit to earningsratio. Buy a promising stock with alow P/E ratio and it typically has ahigh intrinsic stock value.However, the P/E ratio can also bea useful trading tool.By:
  3. 3. Profitable profit to earnings ratiotrading gets you into profitablemid-term trades and gets you outafter the market wakes up to astock’s promise.By:
  4. 4. What is the difference betweenprofitable profit to earnings ratiotrading and the use of the P/E ratioin investing? While investors relyheavily on fundamental analysis ofstocks trades use technicalanalysis to forecast changes instock value.By:
  5. 5. In order to make a profit usingtechnical trading skills a trader needsto be trading a stock that is likely torise or fall in value. Day traders lookfor moment to moment changes instock price and medium term traderslook for stocks that the market hasover priced or underpriced, oftenbased on a misreading of intrinsicvalue.By:
  6. 6. Profitable profit to earnings ratiotrading happens when a traderspots an overpriced or underpricedstock. He buys or sells shortdepending on what he believes willhappen next and waits for themarket to catch up and drive theprice higher or lower.By:
  7. 7. When Does Profit Occur?By:
  8. 8. Traders and long term investors differin how to make money in the stockmarket. A long term investor believesthat he can pick a promising stock,buy it, and hold it until it no longershows promise. He limits his expensesby purchasing just once and, maybe,selling just once.By:
  9. 9. A trader looks to make money in ashorter time span. He will buy and sellwhen the time is right and collect hisprofit more quickly than a long terminvestor. In profitable profit toearnings ratio trading a trader uses thesame approach as a long term investorin picking a stock.By:
  10. 10. However, he knows that when themarket catches on to the value of anoverlooked stock that it will bid up theprice in fits and starts and not in aslow and gradual upward (ordownward) curve. Often times themajority of profit from a stock occursin a few days or even in a few hours orperhaps minutes.By:
  11. 11. Using the principle of profitable profitto earnings ratio trading a trader buysor sells short on a stock and waits forthe market to correct. Then he takeshis profit and goes home before thestock corrects backwards. While thelong term investor is waiting foreventual profits after the first movethe trade is scouting out otherprofitable trades.By:
  12. 12. Return on Invested Time, Effort,and CapitalBy:
  13. 13. A high return on investment intrading stocks is the goal of anytrader. A day trader payscommissions and fees every timethat he enters or exits a trade.By:
  14. 14. Perhaps the most important factorin trading and in calculating returnon investment in trading stocks iskeeping track of just how muchmoney you make on each tradeand how much it costs.By:
  15. 15. Everyone wants to make moneytrading stocks and the savvy stocktrader picks and chooses only thebest opportunities in stock trading,commodities trading, or Forextrading.By:
  16. 16. The point of using the P/E ratio asa guide is that it puts you inpotentially profitable trades. Then,using technical analysis, you canget in and out with a nice profitwhile a long term trader will stillhave his capital tied up whilewaiting for longer term growth.By: