How can you correlate a company stock's performance with overall market performance?
How can you correlate a company stock's performance with overall market performance.
Suppose if market are high from last day close and a stock of a specific company in negative [fallen from previous close]
Should we perceive it as an opportunity to invest in this company and make an assumption that it will go-up with market sooner.
OR Should we think other way around that market is too high and some profit takers will come and market will go down in future; so the stock which is already gone down will go down further.
Is there a right approach more specially for day traders.
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Generally, if you are trend trading, and if the market as a hole is going up strongly and an individual stock is falling sharply on the same day, I would tend to stay away from buying that stock at the moment. The market is showing strength whilst at the same time the stock is showing weakness.
The general rule of thumb for trend trading is to buy rising stocks in a rising market. Or you could look to short sell falling stocks in a falling market.
How can you correlate a company stock's performance with overall market performance.
No you can't. There is no simple magic formulae that will result in profits. There are quite a few statistical algorithms that specialists have built, that work most of the times. But they are incorrect most of the times as well.
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