Picking a stock shouldn't be guesswork or following an anonymous tip. Here is a list of 7 practical criteria you can apply to any Egyptian Exchange stock before you buy.

1. Liquidity (most important for beginners)

Liquidity is how easily you can buy and sell a stock without moving its price much. Blue chips in the EGX30 are highly liquid, while thinly-traded names can trap you in a position. Always start with stocks that have high daily turnover.

2. The overall trend

"The trend is your friend." A stock above its 200-day moving average, making higher highs and higher lows, is in a healthy trend. Avoid trying to "catch the bottom" of a falling stock. See the technical analysis basics.

3. The P/E ratio and valuation

The price-to-earnings ratio compares a stock's price to its earnings. A P/E far above its sector peers may mean it's expensive; far below may mean an opportunity — or a problem. Understand the ratios in the P/E, EPS & ROE guide.

4. Earnings growth

A company whose earnings grow year after year beats one with flat or declining earnings. Look for an upward trend in earnings per share (EPS) over several years, not a single exceptional quarter.

5. Cash dividends (for long-term investors)

Some companies pay out part of their profits in cash. If you want income, focus on the dividend yield and its consistency. Read how to find dividend stocks.

6. The sector and its cycle

A stock's performance is shaped by its sector. Banks benefit from rising rates, real estate from falling ones. Don't concentrate in one sector — diversify across different sectors.

7. Risk and position size

Even the best stock can drop. Set a stop-loss before entering, and never risk more than a small percentage of your capital on one trade — see the 1% rule and risk management & position sizing.

Bottom line

Apply the seven criteria as a checklist: good liquidity + healthy trend + reasonable valuation + growth + suitable sector + measured risk. To speed up the screening, the EGX AI Analyzer evaluates these factors automatically for every EGX stock.

This content is educational and not investment advice.