6 Common Risk-Screening Methods in Stock Selection
Before buying a stock, in addition to applying relevant buying techniques, investors should also use the following 6 risk-screening methods to evaluate a company’s fundamentals. So, what are these 6 common risk-screening methods in stock selection? Next, the editor of Winner’s Academy will explain them in detail.
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Check whether the target stock has a large proportion of restricted shares being unlocked in the short term. The unlocking of restricted shares can significantly impact stock prices, especially if most restricted shareholders are individual investors, as their selling pressure tends to be stronger after unlocking.
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Check whether the company is likely to issue an earnings warning or loss forecast in the near future. If the company’s performance is very poor or even records massive losses, investors should be cautious about buying near the earnings disclosure window.
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Check whether major shareholders have plans to reduce holdings or have previously announced share reductions. If a major shareholder announces a reduction while the stock price is at a high level, investors should either avoid the stock or wait and observe.
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Check whether the company is under strict regulatory scrutiny or if its products/businesses are being squeezed by competitors, and whether there is any short-term improvement potential.
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Check whether the stock has previously been manipulated by market makers and its current price trend (rally phase or distribution phase). If the stock showed clear signs of manipulation during its previous rise and is now in a downtrend, avoid it at all costs—even if the decline seems to be nearing its end.
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Check whether the stock has recently surged due to positive news. If a stock has rallied sharply on certain news, the post-news period may turn bearish, leading to short-term capital outflows.
Only by carefully applying these 6 risk-screening methods before buying can investors determine the success of their investments. Therefore, thorough preparation is essential to improving the probability of successful trades. If you want to learn about leading environmental stocks, click to explore further. Wishing everyone a fulfilling and pleasant weekend!
