How Trade CheckList

1. Economy

The first and the most important step in determining whether it is the perfect time to invest in stocks is to look at the economy. The reason why stock prices rise and fall in value lies in the company's ability to make a profit. If the economy is not in good shape it is because businesses which makes or breaks a country's economy are having a hard time to be efficient with their day to day operations. If company sales are slow it affects growth therefore investors would not be willing to pay more for a single share of a company's stock if they are not making a profit.Although there is always a bull market and a bear market somewhere, it is important to determine where the economy is going in general to help you decide which stocks you should trade long or short regardless of where the economy is heading. Going long or going short on stocks without first assessing the economy is like driving a car at night without headlights on.
Examples of economic indicators to keep a close eye on are the CPI, PPI, housing market data, currency data, non-farm payroll and interest rates. One good website that provides these data would be the national bureau of economic research

2. Pick a sector

A sector groups companies by the type of business they conduct on a daily basis. For info on which sector your stock falls into, one good destination would be yahoo finance A sector mirrors what area of the economy would be greatly affected.For example interest rate cycles that goes from very low to very high in a short period of time, chances are during the time when interest rates are so low it would be profitable for banks to lend out money to people but when interest rates spiked all of a sudden the amount people have to pay for the loan would increase, if the borrowers can't keep up there would be a credit crisis. At this time it is clear that the financial sector would be heavily hit. You would stay out of anything that provides financial services when you discovered that the economy's problems lies in the financial sector or go short on financial sector stocks if you can anticipate the problem looming ahead.

3. Select stock

After determining which sector would be the most active at the current economic condition, it is time to pick the stock within the sector.It doesn’t matter which stock you pick. It could be the best performing in the sector at a time when the sector performs well or the worst performing onewhen the economy is not in favor with the sector.If you’re looking for a long position it is obvious to pick the top three best performing companies in the sector and have a side by side comparison.Shorting the worst performing stock on a bad performing sector gives you the profits in a reverse fashion. This step is an apples to apples comparison in which you pick several stocks in the sector and comparing it with the other ones using their income statements and basic metrics.