What is cash flow? in the field of stock investment? Refers to the movement of money from one place to another, which can be into or out of a business, project or financial product. In the context of the stock market, money flow is used to assess the supply and demand trends that are pouring into groups of stocks. By cash flow tracking, investors can choose stocks in that industry group to invest in and predict somewhat about future price movements.
1. What is cash flow?
Cash flowCash flow, also known as cash flow, is an undeniably important concept in finance. It is simply the movement of cash into and out of an account, business or individual over a given period of time. Cash flow includes both receipts (financial resources) and payments (expenses).
Cash flow management is an important aspect not only in business but also in other areas such as social and personal finance. Effective cash flow management helps to ensure that income and expenditure are balanced and stable. It also allows to assess the current financial status of an organization or individual, and provides the necessary information to make investment decisions, expand the business and minimize risks. Proper cash flow management is one of the most important factors to achieve success and sustainability in the financial sector.
In stocks, cash flow concept used to consider the supply and demand trends pouring into which stock group, from there choose good codes in that industry group to stock investment and somewhat predict future price movements.
2. Cash flow in the stock market in 2024
Money flow in the stock market continue to expand in 2024, driven by many positive macro factors. Although the VN-Index has experienced a significant increase and surpassed the 1,250-point threshold, there is no clear sign that the cash flow will decrease. The market still maintains strong buying pressure, while selling pressure is restrained, creating favorable conditions for the continuation of cash flow into the stock market.
One of the key factors that maintains the market's attractiveness is the positive sentiment of investors. Although there are trading sessions with increased selling pressure, the overall sentiment remains positive, supported by the continuity of cash flow. Confidence in the positive trend of the market remains reinforced, helping to maintain stability and accumulate profits for investors.
The stock market recorded some positive developments, such as the number of shares traded and the trading value on the HOSE reaching a high level, surpassing the threshold of 1 billion shares and 1 billion USD. Although the VN-Index had a few slight decreases, it still maintained stability around 1,250 points, helping the market maintain its strength and accumulate cash flow.
Among blue-chip stocks, there are differences in price fluctuations, but there are still stocks that hold steady or increase significantly. However, there are also stocks that lose points sharply, but these are considered temporary fluctuations that do not affect the overall market sentiment.
In the market of small and medium-sized stocks, many new investment opportunities have appeared, with many stocks hitting the ceiling and attracting the attention of investors. This shows the diversity and attractiveness of the stock market, where not only blue chips but also investment opportunities in small and medium-sized stocks are highly appreciated.
Overall, the Vietnamese stock market in 2024 will maintain its attractiveness and strength, thanks to strong cash flow and positive investor confidence. Despite short-term fluctuations, the overall market trend remains positive and continues to support the development of the economy and stock market in the near future
3. How to recognize cash flow into stocks
How to get cash flow into stocks help investors have the opportunity to find stocks with potential price increase and good liquidity.
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 1 | Day Two | Day 3 |
| Highest price (VND) | 50 | 52 | 55 |
| Lowest price (VND) | 45 | 47 | 51 |
| Closing price (VND) | 48.5 | 50 | 54 |
| 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 |
With the cash flow of stock A going through a growth phase, if this momentum is maintained for many consecutive trading sessions, this shows that cash flow is pouring into stock A. As a rule of thumb, this stock has the potential to increase in price and has high liquidity in the near future.
Nowadays, many securities companies have developed tools to help investors how to determine cash flow in stocksThis requires each person to only grasp some basic knowledge about cash flow in general so that, when looking at charts, data tables or graphics, they can recognize market trends.
In parallel, to determine the cash flow trend of a stock, investors often apply the Price Volume Trend (PVT) formula. This formula is based on the rate of change in market price and trading volume of a stock to make an assessment of its cash flow trend.
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 apply this formula to compare the PV value of the same security or group of stocks over different periods of time, thereby identifying the fluctuations of cash flows. This formula is also often used to compare between different stocks or groups of sectors.
Strategy Cash flow investing is a method trusted by many people, including F0 investors and professional investors. This method helps reduce investors' concerns about risk or adventure. By tracking Cash Flow Chart, investors can identify which stocks are attracting a lot of attention, thereby making the right decision about buying or selling. Investing according to cash flow is relatively simple, does not require complex analysis techniques, suitable for most investors, especially those new to the stock market.
However, it should be noted that cash flow is just a general trend, and “following the crowd” does not always guarantee safety, and sometimes may not bring the expected profit. Moreover, cash flow into a particular security does not necessarily indicate a future trend. Therefore, investors need to carefully analyze and collect enough information before making an investment decision.
4. The importance of investment cash flow management
Investment Cash Flow Management Cash flow is not only an important aspect but also a key factor that shapes the success of every business and individual in the financial field. Cash flow not only directly affects the ability of the business to expand and develop, but also brings financial stability and security.
Understanding your cash flow and managing it carefully helps you maintain a stable financial situation and avoid uncontrolled debt. In particular, effective cash flow management also creates investment opportunities, allowing you to accumulate cash to participate in potential investment opportunities and minimize risk.
In addition, allocating cash flow appropriately helps you control risks and take advantage of the best financial opportunities. This way, you can take advantage of the discount period to buy valuable assets or participate in investment projects with great potential.
Effective investment cash flow management not only brings financial freedom but also helps you achieve your personal goals and live the life you want. Financial freedom is not just about having enough money to live but also the ability to realize personal dreams and interests without worrying about finances. That is the biggest benefit that investment cash flow management brings.
Source: Onstocks
