The idea of profiting from the stock market is a dream for many. However, for many of these hopeful individuals, these dreams fall flat. This leaves many knee-deep under the red line with some poor investment choices.

If you’re one of these unlucky folks, don’t be disheartened; you’re not alone in that struggle. In fact, losing money in the stock market is fairly common—with 90% of people experiencing that unfortunate phenomenon.

That said, if you want to be the 10% of people who profit in this lucrative world, you need to put in the effort to learn the best tactics and tricks to rise above the competition.

Ready to increase your stock market returns? Here are seven ways you can find trends that can signal potential prosperity in your stock portfolio.

Let’s have a look at them!

Follow Moving Averages (And Their Different Time Counterparts)

Moving averages, for the unaware, is a type of technical indicator that smooths out fluctuating price data points. This can give a more accurate assessment of the average price of a particular stock.

This type of technical indicator helps mitigate volatile and short-term stock price fluctuations. 

Within the sphere of moving averages, there are simple moving averages that use a basic arithmetic formula with no weight basis. And there are exponential moving averages, which is a type that places greater emphasis on more recent prices.

Furthermore, moving averages may also employ different time periods. For standard moving averages, the 50-day period is the most common benchmark across multiple online sources. 

There are also 20-day moving averages and 200-day moving averages—offering a higher and lower degree of variability respectively.

Looking at a stock’s performance through the moving average method helps give you an idea of the trend direction of said stock. By closely monitoring a stock and seeing it crossing above or below the MA benchmark, you can act upon its buy or sell signal accordingly.

Watch Out for Signs of a Stock Breakout

Knowing a stock’s support and resistance level is crucial for you to make informed decisions. These levels refer to when a stock’s price surpasses a set high or low point.

Stock prices can move for a variety of reasons, from changes in market sentiment to internal policy changes. But on the technical side of things, stocks that push beyond their commonly-held threshold are usually a telltale buy or sell signal.

So, you may question, how do you predict whether a stock is on the verge of breaking out? There are a couple of ways to tell when a stock is about to enter a breakout phase.

One way is by identifying positive chart movements, like a bullish cup-and-handle trendline. Another way is to use the Bollinger Band breakout strategy, a technical indicator that can help you identify sharp, short-term price movements.

Other variables can influence stock movements, but identifying them comes with experience and wisdom. 

Regardless, the best way to exponentially grow your learning is by actually investing in stocks, so be sure to check current market prices like the WDS Price and make your first investment decision from there.

Monitor News Sites and Reports Daily

The charts you’re glued to don’t exist in a vacuum—it’s joined to the aftermath of real-world events. In fact, it’s very often directly related to the actions made by stakeholders and actors in the real world.

Having said that, you should try to stay up to date with all the information regarding your stock’s company movements. 

This is directly in line with the concept of fundamental analysis, which is a type of assessment that gauges a stock’s future profitability based on macroeconomic factors rather than statistical trends.

In the fundamental analysis process, investors look into a company’s financial statements, changes within the corporation’s management and internal processes, as well as global and industry news that may affect the company’s performance.

If you want to maximise your odds of profiting in the stock market, then you have to rely on resources like MarketWatch, Bloomberg, and other financial blogs to be in the loop when new updates and changes emerge regarding your company.

Furthermore, you also have to look into the periodic reports of your chosen company’s stock. This can be indicative of the relative performance of the company, which can then be paired against the stock chart performance.

Track Relative Strength Index (RSI) of Key Stocks

Have some stocks you’re eyeing, but not quite ready to jump at their current price point yet? Then another way to know when a stock can become profitable is by a strong relative strength index.

Often called RSI, this technical indicator is a momentum oscillator that measures how fast a price movement changes, typically on a scale from 0 to 100. 

An RSI above 70 often indicates a stock may be overbought, which can indicate a correction. Conversely, an RSI below 30 suggests a stock could be oversold, which can indicate a rebound.

By monitoring the RSI, you can better time your entry and exit for investing in a certain stock, potentially enhancing your investment outcomes. 

Consider Trading Volume Trends

Trading volume, also known as the number of shares that are traded in a given period, serves as an intensity and sustainability gauge of a stock’s price trend. 

To paint an example, when there’s high trading volume and a price increase, this suggests that buyers are interested in buying the stock, which can further indicate a sustainable and potentially upward trend.

Conversely, a high trading volume and a price decrease can suggest that investors want to exit out of their position. This is indicative of selling pressures for that particular stock.

Looking at trading volume can help you get a better overview of how the market is performing. This, in turn, can make you more informed in your investing choices.

Look at Market Sentiment

While not the most quantifiable variable, knowing market sentiment is crucial for you to develop a more comprehensive understanding of a stock in the market.

For one, if sentiment is strong enough, this variable can do all the heavy lifting in influencing a stock price. News headlines (and comments), investor polls, and social media posts can offer insights into whether the market is feeling bullish or bearish.

Knowing the general sentiment can help you reformulate your investment strategy accordingly. If positive sentiments are the prevailing status quo, you can continue with your investment plan. And if not, then think twice before investing again.

Check Financial Ratios Like the P/E Ratio

Another fantastic way to know whether a stock will reap positive returns is by looking at its financial ratios.

One classic example is the P/E ratio. This ratio divides a company’s stock price by its earnings per share (EPS), highlighting how much the average investor is willing to pay per dollar of earnings. 

A high P/E ratio might indicate that a stock is overvalued, while a low P/E suggests a stock indicates that it’s undervalued. 

While useful, there are many other ratios that you can use to gauge a stock’s potential profitability. 

The Price-to-Book (P/B) ratio and Debt-to-Equity (D/E) ratio, to name a few, can help give you a deeper understanding of the stock’s market position, leading to more informed investment decisions.