Stay away from IPOs

Stay away from IPOs

Stay away from IPOs

It is already hard to guess what a stock price movement will be when you have more than five years' worth of data that you can analyze and compare. So, imagine yourself doing that without any prospect whatsoever on how the stock had acted and reacted according to news, volatility and world changes. It will be even harder to profit from it.

Stay away from IPOs

Sure, you could potentially make a lot of money if you get one initial public offering (IPO) right, but you could also make a lot of money if you bet in the lottery right? But I do not like this type of operation and I would recommend you to stay away from it. Why? Well, let's say that I do not feel comfortable driving to a new city that I haven't been and don't have any clue about it, in the middle of the night, with my headlights off and with no maps for that matter. I prefer something I am able to analyze and act upon it.

That is why I recommend you to only invest and trade on stocks that have been in the stock market for at least three years. You can always try to trade in new stocks but it will be harder. If you are a day trader, then it might be ok since you do not require so many data in order to analyze properly if that stock offers you a decent trade. On the other hand, swing traders should avoid new stocks since they will not have enough data to complete their research.

You might argue that a relative strength index only requires 14 days to calculate. True indeed, but such a short time frame will not be able you to compare the stock move with its RSI then leaving you blind to act upon it. A stock that has been around for a while might enable you to have an analysis that goes something like this:

"Ok, last time when the RSI was this high, the stock plummeted."

That is only achievable with a stock that has been around for a while and that you can gather enough data to analyze it.

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