How to recognize cash flow into stocks

Recognizing cash flow helps investors find stocks with potential for price increase and good liquidity.

Cash flow is a general term for the movement of money into or out of a business, project or financial investment product. In securities, cash flow is used to consider the supply and demand trends that are pouring into which group of stocks, thereby choosing good codes in that industry group to invest in and somewhat predicting future price movements.

This index is determined by the average value of the stock price (average of the highest price, lowest price and closing price) multiplied by the daily trading volume. The cash flow will be clearly shown when comparing the average value results in the past. At this time, investors will observe whether the cash flow is negative or positive, growing or decreasing.

Example with a stock A:

A-shares	Day One	Day Two	Day 3
Highest price (VND)	50,000	52,000	55,000
Lowest price (VND)	45,000	47,000	51,000
Closing price (VND)	48,500	50,000	54,000
Trading volume	1,000,000	1,200,000	1,300,000
Cash flow (VND)	47,833,333,333	59,600,000,000	69.333.333.333

Thus, the cash flow of stock A is growing. If this momentum is maintained for many consecutive trading sessions, it proves that cash flow is pouring into stock A. As usual, this stock will have the potential to increase in price and high liquidity in the near future.

Nowadays, many securities companies have built tools to help investors track cash flow automatically. Each person only needs to grasp some basic knowledge about cash flow in general so that when looking at charts, data tables, graphics... they can recognize the market trend.

In addition, to determine the cash flow trend of securities, investors also use the Price Volume Trend (PVT) formula based on the rate of change of market price and trading volume of a stock code. The calculation is as follows:

PV (Price Volume ) = %P x V

In there:

%P: Rate of change of market price over a period of time

V: Transaction volume in the corresponding period

If the later PV is greater than the previous PV, the cash flow is trending up and the previous trend will continue. Conversely, the cash flow is likely to weaken and reverse if there is no new cash flow to continue to supplement.

Investors can use this formula to compare the PV value of the same security or group of stocks over different periods of time to see the fluctuations in cash flows. The above formula is used to compare between stocks or groups of sectors.

Investing in stocks according to cash flow is a strategy that many people trust, whether they are F0 investors or professional investors. This method helps you not to worry too much about taking risks or risks. Cash flow helps investors know which stocks are receiving a lot of attention, thereby seizing the opportunity to close the profit. In general, investing according to cash flow is quite simple, does not require complex analysis techniques, suitable for most investors, especially those who are new and inexperienced.

However, it should be noted that cash flow is a general trend. Therefore, "following the crowd" is not always safe, and sometimes it brings in profits that are not as expected. On the other hand, cash flow into a certain stock is not necessarily a future trend. Investors need to analyze more parameters and collect more information to make more accurate decisions about investing money.

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