Trader Toolkit: Why Peer Pressure Has Its Benefits

With the ever-increasing number of trading platforms and the growing allure of low-to-no-fee brokerages, new traders are confronted with a deluge of options when it comes to trading and investing. But lost in the promises of sleek interfaces and free shares for signing up is the fact that successful trading takes time, practice and an understanding of resources experienced traders use on a daily basis.

Using the charts and tools available on the Webull trading app, which offers zero-commission trading and a suite of advanced trading analysis and charting, the Trader Toolkit series of articles will aim to explore the ratios, indicators and signals that play an integral role in how traders generate ideas and form convictions on their medium- or short-term trades. 

Stock market trading is sometimes less about how well or poorly an individual stock does and more about how it performs relative to other similar stocks. If a particular economic or consumer trend promises to impact companies in an entire industry to some degree, traders will ultimately want to put their money in the one that stands to perform best.

Beyond that, other comparisons such as market cap or revenue performance can sometimes make a thriving stock less appealing than one that might be experiencing some volatility at the moment. These are the factors that traders look at if they’re seeking the ideal exposure to a specific segment of the market.

That’s where peer comparison tools like the one from zero-commission online broker Webull come in handy. The platform offers traders and comprehensive look at how an individual company stacks up to others in its market segment and also provides insight into which peers might have an edge, which you can see in the company page for Microsoft Corporation MSFT.

This summary view shows both Microsoft’s actual fundamental statistics across an array of metrics as well as how those figures compare to other companies in the software industry, of which there are 214. For the most part, Microsoft largely outclasses the majority of its rivals except in its price-to-book ratio and its debt-to-asset percentage.

However, the high relative valuation is to be expected since Microsoft is in the top 10 percent of software companies in terms of price-to-earnings. Taking a closer look at those companies with higher relative earnings mostly reveal low-priced companies like PPDAI Group Inc. PPDF and Cheetah Mobile Inc. CMCM (which might be exactly what an investor is looking for).

Microsoft’s debt ratio is also not much of a surprise given the trend among large tech companies like Apple Inc. AAPL and Oracle Corporation ORCL. However, if a trader were looking for something with fewer liabilities, they could scan the list to find stocks like Twilio Inc. TWLO to consider.

Obviously, there are other points of comparison, and traders might prefer to examine other aspects of a stock’s profile depending on what area of the market they’re in to what their goals are in the trade. Regardless, having these points of comparison can be an invaluable asset in staying ahead of your trading peers.

Webull is a content partner of Benzinga