Stock market updates and investment newsletters provide information and guidelines regarding the future trend of stocks and also advice regarding which stock to buy immediately. Based on these recommendations and many other factors such as, the credit ratings of the companies in which you wish to invest, analysts’ ratings and latest stock market news, you can set up target prices for buying and selling a stock.
However, you will still have to speculate about the time when you would like to pull the trigger for buying or selling. For instance, if you have set a target price for buying a stock at $4 a share and the price comes up to $4.10 a share and you keep waiting thinking that within a day it might touch $4, you might be in for a shock if the trend reverses and the stock starts moving up. You would be repenting that you stuck to your target price and lost a golden opportunity.
Similarly, if after doing a lot of researchyou set the target price for selling a stock at $6, the stock goes up to $5.85 and you keep hoping that it will touch $6 eventually. If the stock starts moving down, you would have to rush to sell the stock at whatever price you can gather, unless you have the financial capacity to hold on to the stock till its next revival. But you will not make any money till you sell what you have bought. The profit will come only when you sell, otherwise it is just a notional profit on paper.
It is obvious that target prices should be set after a lot of research that would give you a fair idea of the growth potential of the stock. Going through a rationale process based on analysis of the project performance and financial statements over a specified period of time will enable you to set the target prices.
A graduate of the US Air Force Academy and a MBA with Finance majors from the University of Colorado. He started investing in high school and continued to invest throughout his career in the US Air Force, Bank of America Corp, Coopers & Lybrand and Ross Perot.