One important thing to learn when dealing with the stock market is to know how companies work. You will have to learn the driving force of the companies to plan to invest in. Whose in charge of running the business? How many years of experience does the figure have in running companies? What are his plans for the future? These are just some of the questions you have to ask yourself, because management has a major effect on the price of a stock. If you find out that someone who has very little experience running a company is CEO, then that should set off a red flag. Not only should that be a red flag to you but to everyone who has invested and is planning to invest in the stock. That alone has the power to lower the stock's price a significant amount. So pay attention to who's in charge.
Though knowing who's in charge is vital to making wise trading decisions, there is another factor that is more important. That factor is the insider transactions. The upper management of publicly traded companies also have the ability to purchase and sell their company's stock. By law upper management has to let the public know there trading actions. So if the CEO purchases one million shares of his companies stock, he is obligated to make that information public. Why is that important to know? Because if you are considering to invest in a particular stock and you find out that the CEO, CFO, and the COO are selling all their shares, you should be greatly concerned. That should let you know that something major has happened or is about to happened that could negatively effect the stock's price. So you should research the insider transactions of a company before investing.
So when considering in investing in a stock, take a look at who's in management. Try to find out general information about them. Find out how many years of experience they have. After you find out basic information about them, find out their recent insider transactions. Are they buying or selling their shares? Why are they taking those actions? You should also check the recent news. All of these steps should help you make wise and informed stock trading decisions.
