Stock Selection Process

There is no single market secret to discover, no single correct way to trade the markets. Those seeking the one true answer to the markets haven’t even gotten as far as asking the right question, let alone getting the right answer.

Jack Schwager

 

When I entered the markets and started exploring my way to get to the holy-grail of the market, one of my friend suggested to approach the market through Fundamental analysis,other suggests, trading with Technicals is the best way as it is difficult to asses what happens to the stock over the next 3 or 5 years...


...other suggestions are

  • trade options 
  • trade futures
  • use RSI,MA
  • use quants
  • etc, etc. 

 

Finally I decided to approach the market considering some Fundamentals like good ROE, low debt or good Interest Coverage ratio. With this my watchlist is ready. Now apply Technicals to enter and exit the trade. 

My thought process to approach the markets like this is to cover the important aspects of both Fundamentals and Technicals. 

Select good Fundamental company with the below parameters

  • Market Cap > 2000 (relatively stable companies)
  • ROE > 15% (3 year average and 5 year average)
  • Debt to Equity < 0.55 (or reducing debt)
  • Interest Coverage Ratio > 3 (important for high debt/Banking/Finance companies)

apply the filter on screener.in