Why You Should Care About Stock Splits

Stock splits can be extremely profitable things. When a stock splits it lowers the price that its shares are trading at and increasing the amount of shares it has to compensate.

For example when a $20 stock has a 2 for 1 split the stock becomes worth $10, however there are twice as many shares out there for investors, and each investor who owned the stock before the split will have twice as many shares.

The interesting part about splits is that they signify growth, because the only companies that split their stocks are companies which have stocks that are constantly increasing in value, otherwise there would be no point to make it cheaper.

In fact throughout history stocks that have just split seem to do much better then stocks that have not. So they can normally give off a pretty decent return, this is especially true in a bulls market.

Even so that does not mean that they are the only thing that you should consider when trading a stock. Instead whenever you hear about that has just split take a look at it, put it in your watch list.

But of course still use your own criteria for entering the trade. For example if you like to trend trade a stock splits you may want to keep it in the back of your mind and wait to see if a trend develops.

If it does that is great and hopefully the fact that the stock just split will also help you make money. If it doesn’t give you a signal then there are always more stocks to invest into.

For more on historical stock splits visit http://www.stocks-simplified.com/Historical-Stock-Splits.html

For the definition of a stock split visit http://www.stocks-simplified.com/Stock_Split_Definition.html