A Beginner's Guide to the Stock Market

by Matthew R. Kratter

Never buy a growth stock if the stock is trading below its 200-day moving average, or if the 50-day moving average is trading below the 200-day moving average.

Also, I like to look for growth stocks that have a market cap of $5 billion or less. It takes a lot less money to push a $5 billion stock higher than it does a $500 billion market cap stock.

I also like to look for growth stocks, where the float is less than 20% of the total number of shares outstanding. The “float” is simply the number of shares of a stock that are actually available for trading.

I also like to look for growth stocks with a high short interest. “Short interest” is the quantity of shares that have been sold short by those who believe that the stock will go down. You can find a stock’s short interest here:

I usually like to risk no more than 1% of my trading account on each stock trade. Let’s say that I am trading a $100,000 account. In that situation, I will risk only 1% of my account, or $1,000. If I enter the stock at 100 and the 50-day moving average is at 95, that means that my risk is 5 points on the stock (100-95). In that case, I should only buy 200 shares of stock. If I buy 200 shares of stock, and the stock falls 5 points, I will have lost $1,000 or just 1% of my total account size.