Introduction
On this page all tips and tricks to make easy use of the stock data analysis provided by StoCoto.com are collected. New ones will be added based on changes made to the stock comparison tool, data that has been added or questions from our users that have been answered.
All the tips and tricks
Tip 1: Comparing volatility to price change
The volatility of different sectors can be compared to all stocks combined to get an understanding of the risk profile of a certain sector. Volatility does not equal risk, but in combination with other measurements it provides a good indicator. Its relationship to price change such as continuous growth, decrease over time or ongoing swings makes a powerful combination. This can be used to determine if a stock fits within the risk profile of a trader.
Tip 2: Using the sortable table
A table might not be the most intuitive way to display data as it takes much effort to interpret it correctly. Despite this drawback, it still has a purpose as it allows different data points to be compared directly. To enhance its use, each column can be sorted according to its values. Exploring the data using sorting by different features ranks companies differently and can result in surprising insights that can be further examined and visualized using the available graphs.
Tip 3: Insights into volume
Trade volume is an often-undervalued feature of a stock because it has no direct interpretation due to its history and link with price. Therefore, StoCoTo has a relative trade-volume that compares current trading volume to the historical volume over the previous 12 months, and an increase or decrease can be detected and compared to other stocks. This can be combined with other features to understand how a stock is currently behaving and provide more interpretable insights.
Tip 4: Combine price change and volatility
A higher level of volatility in the past month indicates that the share price has moved significantly in the same time period. Volatility itself does not explain in the direction in which the price has moved. However, combining this with the price change in the same period (e.g., 1 month) does provide this insight. The graph that combines both values provides an indication if multiple stocks have moved in a similar direction or if this one is exceptional. Performing this analysis for both the index on which it is listed, and the sector creates a powerful insight and could uncover trends.
Tip 5: Understand the relationship between volatility and high trade volume
It is reasonable to expect that a trading volume that is above average could lead to greater price volatility. This reason could be that a group of investors wants to exit their position or increase their share of a company in their portfolio. However, these two are not directly related to each other. An inspection of the volume against volatility plot provides an insight into the effect on the price of highly traded shares. More importantly, a comparison can be made with other stocks, and a reasonable understanding can be obtained if the price change is due to the volume that is being traded.
Tip 6: Identify the most traded companies
Every stock market index or sector has its favourites for buying and selling. Each comparison page includes a histogram that shows the traded value, which is the combination of the volume (number of shares) and the close price. When plotted in a histogram they sorted according to their size, hence the ones that have the most money being traded is located on the left. For each index (or sector) this makes it straightforward to identify the most traded stocks in terms of monetary value.
Tip 7: Find the stock market that has most companies from a particular sector
Sometimes a preference for a sector occurs, but one prefers to select an individual stock market to invest in for their own reasons. For example, this can be the preference for an index tracker to maintain diversity. Using the table with key data in the preferred sector, sorting can be performed on the column ‘stock market’. This provides a first indication in which stock market a sector is more strongly represented. Using the trading value (volume * price) that particular stock market can be visually inspected to validate that these companies indeed play a large role or they are minor players.
Tip 8: Combining the table with a graph
When many points are shown in a graph, it can be challenging to find the company of interest. Hovering over all 100 points is much effort. An easy way to identify the company of interest is to sort the table (at the top) according to the name of the company and find the desired company. Then look up the value of the parameter of interest. With this value return to the graph of interest and use it as an indication of where the company is located.
Tip 9: Money Flow Index vs Relative Strength Index
Both the money flow index (MFI) and the relative strength index (RSI) are intended to identify overbought and oversold signals indicating a new bearish (declining) or bullish (increasing) price trajectory. They are not calculated equally, with RSI only using price and MFI using both price and volume. This results in different values and a different indication for buying or selling. Combining these two indicators can provide a stronger signal, leading to a more balanced interpretation. Furthermore, both are available for all companies in an index or sector and the most promising ones can be selected for further investigation of their potential.
Tip 10: The link between relative trade volume and price change
An often made assumption is that price increases (or decreases) when volume is higher. The cause behind it would be high demand or traders trying to sell their stock. As such, this should be shown by a high volume of trading. In practice, this relationship is not straightforward. It is possible that the share price will rise with volume trading below average. The XY-plot that shows the relative trade volume against the price change allows a comparison between both. This relationship can be established for all companies within an index or sector. An interpretation of each company can be created and a potential opportunity for investing (or selling) can be identified.
Tip 11: Comparing short and medium term price change
In one of the graphs for each index or sector, the short (1 month) and medium (3 months) price changes are compared. These are historical performances, so do not indicate the price direction of the future, but provides an insight in recent performance. If the medium term is profitable but the short term is negative that means something different when, for example, both are profitable or negative. Both these figures combined, in relation to other stocks can indicate current performance relative to recent performance in relation to the market or sector as a whole. Hence, an opportunity or threat could be identified that could be investigated further.
Tip 12: The link between price change and volatility
Understanding volatility is not always straightforward as it is a calculation of the fluctuation in price. These can happen in an increasing or decreasing trend and are not directional. It is possible for a price to fluctuate strongly but result in a neutral return over a longer period. Linking the volatility to the price changes over 1 or 3 months provides a first indication of the direction of the price change. This can be more useful if it is placed in the context of other companies in the index or the relevant sector.
Tip 13: Volume versus volatility
Price change is often driven by traded volume. If many traders want to buy or sell, it could be expected that the share-price will go up or down. This should be reflected as a higher volatility. Therefore, comparing volume and volatility is sensible as this takes away the direction in which the price moves. However, there is no direct link between volatility and volume. There is more work to be done to understand the amount of volume needed to make a price change, but comparing these two features provides insight into stocks that are more robust (high volume does not lead to more volatility) or ones that move fast (high volume does lead to more volatility). As a sidenote, a trader could identify a stock that has low volume but high volatility.
Tip 14: Peer group comparison
For each index or sector a peer comparison is available that shows price change, relative trade volume and volatility. This is a unique feature of StoCoTo.com and provides a direct insight into the returns and risks. When events occur that affect some companies in a big way, these graphs can be used to obtain an insight into whether the index or a sector as a whole got impacted. In these graphs, all stocks are included resulting in an independent reference value as it includes many sectors and geographies.
Tip 15: Confirm your findings in other graphs
By observing one XY-graph an impression is often obtained about the performance of a stock. This can be misleading as two indicators can’t fully explain what is going on. For example, if a company stands out in the relative trade volume (1 month) vs volatility (1 month) graph, it is worthwhile to verify the price change 1 month vs 3 months plot to investigate in which way its price has changed. A critical view and combining insights have a considerable higher chance of obtaining the correct view.
Tip 16: The use of reference lines in the technical analysis
To perform the technical analysis of individual stocks, several graphs are available that contain reference lines. These are green coloured. The values at which these lines are placed are based on the theory for which they were initially developed. For each technical indicator an article is present that describes its calculation and explains the reference values. In practice, these reference thresholds are not perfect and an experienced trader can use alternative reference lines that provide trading signals that could lead to better results.
Tip 17: Researching technical indicators
The technical indicators provided by Stocoto are a powerful tool for understanding the behaviour of the stock price. Unfortunately, they are not perfect. To get a better understanding of their intended use and how they are calculated, it is recommended to read the articles that are available under the ‘guides’ section. Furthermore, it can be suggested to do more research on how these indicators have been used by others and how they would fit into a trading strategy. Lastly, there has been some research done on these and it is worth using for example scholar.google to expand your knowledge.
Tip 18: Understand technical indicators from the current perspective
In hindsight, it is easier to understand the change in price in relation to a technical indicator of overbought or oversold conditions. However, it is more difficult to apply the correct knowledge in the current situation because its future price behaviour is unknown. In other words, explaining the past is easier than making a correct forecast. Therefore, when interpreting recent trading signals, ignore (partly) the price change that comes afterward to get a better understanding of their intended application and usability.
Stocoto.com provides a tool to get more insights into stock performance. However, it should be noted that stocoto.com does not give advice and it is recommended to use additional resources. It is up to the user to make decision on which stock to buy or sell. The price of a stock can increase or decrease.