7 Reasons Supporting a Systematic Stock Analysis Process

There are 7 simple reasons outlined below that support the systematic analysis of stock prices . Our purpose is to help educate and guide members in that process.

Analysing stock prices can involve evaluating various factors to make informed investment decisions. We simplify matters by narrowing down our focus to one element and that is the price itself. If you are trading price, it makes sense to understand and analyse the price movement.

The only stock market advice you can trust is the price –

the  price never lies.

Using a structured analysis process

is essential for several reasons:

  1. Data-driven decision making: A process that helps investors organise and analyse relevant data systematically. By incorporating a process of quantitative factors investors can make more informed decisions rather than relying on intuition, emotions or overcomplex inputs.
  1. Risk Management. A structured approach allows investors to assess and manage the risk associated with a particular stock trade as part of its investment strategy. This includes understanding market trends and historical price movements.
  1. Consistency: Following a consistent process helps investors avoid making varied impulsive decisions based on short-term market fluctuations or emotional reactions. Consistency is key in developing a long-term investment strategy.
  1. Objective Analysis. A process helps investors maintain objectivity by relying on predetermined criteria and metrics. This reduces the influence of emotions and biases, allowing for a more rational assessment of investment opportunities.
  1. Efficiency: Having a well-defined process streamlines the analysis and decision-making process, making it more efficient and effective. This is particularly important in the fast-paced world of financial markets where timely decisions can be crucial.
  1. Focus on Relevant Information: Price analysis takes on growing importance and helps to quickly identify trends in price movement.

The “demise of fundamentals” as highlighted by renowned investor Jim Chanos signifies a growing concern in the investment landscape. Chanos, famous for his expertise in short selling, has pointed out the evolving challenges surrounding traditional fundamental analysis in today’s markets.

What isn’t in full force is the golden age of fundamental investing. Recently we saw a steady procession of overseas investors tell the UBS Australasia and Sohn Hearts & Minds events in Sydney that the combination of passive investing, algorithmic investing, retail investing and momentum trading meant fundamental investing simply isn’t working as it once did.

  1. Continuous Improvement. Following a process allows investors to adjust, review and refine their approach over time more easily. By analysing the outcomes of previous decisions and being able to benchmark them against results, investors can learn from both successes and failures, leading to continuous improvement in their investment strategies.

Stockradar employs its proprietary Trend Intensity Rating System to support its trading strategy by using a quantitative and ordered process of assessing the trending attributes of a stock and the propensity for stock price movement. Below is a table providing a simple overview of the price based attributes the Trend Intensity Rating System focuses on. For a more detailed explanation click here.