Thursday, April 19, 2012

A Trader’s Guide : How and why you should trade..

Well.. Its been long ago I ve written something over here. These days, am being pretty busy doing things which are needed most. As I promised in my last post, you will see a series on trading and know the what is what of stock market.

Any user with a laptop can easily figure out how to make an order.. so no diggings into that.

Only 20% of the people make money in the market. The other 80% join the market to give money to those 20%. Why do most of the people fail.. ??

1. No knowledge on how the market works.

2. No planning,

3. No discipline.

If you don’t have any one of the qualities above, do not risk ur money. That’s what ppl say out there. So, getting to know the ways of trading initially is more important than knowing how to trade.

There are basically 3 types of trading methodologies that we work on..

1. Day trading.

2. Swing trading.

3. long term investing.

Each method differs from other in terms of risk, returns, capital and many other factors. As a beginner, we usually trend to work on day trading and swing. Since am not a big fan of long term investing, where you invest a lot and sit quiet for 4 or 5 years,  I stress on swing trading for a while, know about it and in turn let u too know about it.

Well.. swing trading is nothing but trading for a very short period of time.. lets say 2 to 4 days. When analysts talk about stocks and trades, they talk about all the fundamentals of the company.. analysis of the balance sheet, ratios.. a lot .. but none of them is needed for you if you are a swing trader. As a swing trader,

- you don’t care about the fundamentals of a company.

- you don’t care about the products they sell.

- you don’t even pay attention to what the company is going to do next year.

This kind of trading is based on only the law of supply and demand. Demand increases, you get to supply. Supply increases, you gotta demand from the market. that’s it. As said earlier, since you are trading based on the market, not on the fundamentals, risk factor is high, so is the return on your capital.

Check back tomorrow to learn more. cheers…. !!!

Today’s Book I suggest :

Timing the Market – Curtis Arnold




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