How to Know When is the Right Time to Buy Stocks

First of all, do research on the company you trying to buy shares of stock. There are many resources to do this: Google Finance, Yahoo! Finance, CNN Money, Morningstar, etc. Your brokerage account might include comprehensive research tools as well.

Analyze the P/E, history, growth of the company. Look at the revenue, margin, and profit from the public filing. Look for potential growth in the future, company also gives guidelines during their quarterly or yearly report.

When you buy shares of stock, don't buy all in once, try to buy in sequence. If you have faith in the company but the price is keep dropping, buy more! if it keeps dropping and you lose 10% of the value, get out and take your loss.

It's always good to hold a stock long term unless there is a serious problem with the company. Although, you might get a lot of profit by buying stocks before their earning, but you can also lose much money if the report is not great.

Watch how the market react and pay close attention at the market index such as S&P 500 and DJI. During economic recession where unemployments are high, subprime mess, the market usually react harshly on any bad news althought it might have been repeated over and over again. This is probably a good time to "short" the stock that you think will not perform well.

Look for hot sector, for example: education and energy were hot sectors in 2007 and financial was a bad sector to get in unless you want to hold it in a very long term. On the other hand, tech might always be considered as a hot sector. However, we should not forget what happened in the dot com burst.

Never get into over hyped stocks if you already miss the boat. China stocks for example, after growing so much for the past 2 years, they have a 20% down price correction in just less than a month. I learned this from experience and I don't want you to experience the same thing.

Don't be greedy, once you think you reach your goal, sell it. Remember that Sheep get sheered; Pigs get fat; but Hogs get slaughtered.