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Stock trading has been around forever but sometimes it can be difficult to construct a bias for whether or not a given company is currently overvalued or undervalued.  One of the ways stock traders tackle this problem is to analyze the most commonly watched stock metrics.  Common examples here include price-to-earnings, return on investment, earnings per share, and compound annual growth rate.  Here we will look at what goes into each of these calculations to determine how they are used when generating new ideas for stock positions.

When we look at some of the common problems that are typically encountered by spread betters (of all experience levels), improper position management often comes in near the top of the list.  In many cases, a trader will conduct the initial market analysis, set a profit target and stop loss, and then move onto the next trade.  This type of approach has become even more popular with the rising popularity of automated trading software.  But it is important to remember that trading is never this simple, and spread betters can limit many potential losses by taking the time to monitor the changing conditions of the market after the initial trade is executed.
 

When spread betters discuss their daily market activity, the majority tends to focus on one of the major asset classes:  stocks, commodities, or forex.  There are some advantages to this approach, as it will allow spread betters to really become an expert in a given area.  It will also become much easier to spot opportunities when they occur because you will have a much better sense of when a certain asset has become overly cheap or expensive.

But one thing that gets missed when spread betters focus on one asset class alone is the fact that each of these asset classes are deeply connected.  Having a better sense of the ways these asset classes are connected can make it much easier to identify emerging trends before they happen.