How To Use The IBD: The Complete Guide

Not sure how to use the IBD? Well, what follows will be my definitive guide on how I use the Investor’s Business Daily along with Investors.com. For a while this guide will be a work in progress but eventually, I want it to be “the” resource on how to get the most out of the paper. I’ve read How To Make Money In Stocks, the Successful Investor, nearly all of the AskIBD and all the help sections on investors.com and scoured the internet looking for the best way to put this guide together. What I decided was that anyone can tell you the features of the paper. What matters more is if they can tell you how to translate what you find in the IBD to actual success in the market.

You see, the one best asset of the paper is also its biggest weakness. It has so much valuable information in it that it’s hard to focus on the essentials that will make you money. The way I see it, there are only two ways to make this guide a success. The first is, if I actually show you the steps I take to use the paper and also show you that I made money with those steps. The second is if you do the same.

I’m not going to lie to you and tell you that I am a stock market wizard. I didn’t write the CANSLIM theory. Quite the contrary, I am starting my stock market investing program from the beginning and with no track record. I am just trying to master what I’ve been learning. While this might be a negative, it’s really a positive because everybody that starts investing on their own, starts in exactly the same boat. Maybe you are new to the stock market like I am at the time I write this and you can benefit from the experience we will both share. Maybe you are an investing veteran and you can help share your input in the comments. Either way, let’s hope that this guide ends up at the top of the heap as far as maximizing your time and effort with the paper.

With that said, I think the biggest challenge each investor has to face each day, is how to take what you read in the paper and boil it down into a winning stock pick. My first question is what happens in between?

The first step I take each day when I read the paper is to figure out the general market direction. To do this, I actually use investors.com and the eIBD together. Personally, I like to view the charts of the indexes on the website first. It’s a little easier than viewing them in the paper. They are also free (as of this writing) for nonsubscribers. William O’Neil advises to only invest when the market is in a confirmed uptrend as 3 out of 4 stocks will follow the trend. He says that you should also spend your time learning this skill yourself.

When looking at the market indexes, there are four big ones. The Dow Jones Industrial Average, the S&P 500, the Nasdaq and the New York Stock Exchange Composite index or the NYSE. I take the time to look at the index and answer two questions.

First, did the market index close higher or lower than the previous day. Second, did it close on higher or lower volume than on the previous day. If the market closed higher or lower on lower than average volume, then I basically ignore it. However, if the market closed higher on higher volume, this is a sign of accumulation or buying from the institutions which is a positive sign. If the market closed lower on higher volume, then this indicates a distribution day. When the market is under accumulation this is a good thing for us investors.

Here is what I suggest you do each day.

1. Log onto investors.com


2. Look at the four market indexes and analyze the price and volume action of each index and determine for yourself what kind of day it was.


3. Watch IBDTV’s market wrap video which will walk you through indexes you just reviewed. Compare your findings to the video summary and learn from your mistakes.


4. Next, read the Big Picture column to review the days action. Pay careful attention to the Market Pulse Current Outlook. Let it be your guide and invest when the market is in a confirmed uptrend if you want to follow O’Neil’s strategy.


5. Turn to page B2. This is the General Market/Industry Groups Page titled, How’s The Market.


6. Here you can review the indexes again and also find additional market indexes like the S&P 600 and the New America index. The IBD Mutual Fund index is also on this page along with some other tools to get a feel for market direction. This is also where you’ll find the leading industry groups but I’ll come back to that later.

While if you want you can just rely on IBD editors to tell you what to do, I prefer to know the inner workings of what’s behind determining market direction and also prefer to know every step inside and out to know exactly what’s going on.

That’s all I have time for today. I will add to this post later as I have time to add more detail. Until then have a great day.