Develop A Systematic Approach To Start Trading In The Market
In order to be successful in trading, you need to be successful consistently, irrelevant of what approach you use to take trades.
The key thing to be successful in the market is to have a good trade plan, proper risk management, discipline and access to market information. These are definitely crucial to be successful in the market but at the same time, you also need a point of view on the market to be able to take a trade.
What is a point of view?
The point of view is a method by which you develop a sense of how the stock market will move. If you think that the market is bullish then you want to buy the stocks. If you think that the stock market is going down then you are bearish on the stock.
So how do you develop a point of view in the first place?
Have a systematic method to analyze the market
To get a view of the market, you need to develop a systematic approach. There are fundamental analysis, technical analysis, and quantitative analysis to help you decide on what the market may do next.
The typical traders will use one of these methods to judge what the stock market will do next.
- The traders or investors may look at the quarterly numbers and they look impressive if the company’s financial health looks sound and the fundamental factors of the company are positive then the stock makes a good buy
- Technical analysts look at charts to analyze what the trend of the market could be. They look at candlestick patterns and indicators to check the short-term stock market signals
- Quantitative analysts look at the PE ratio and the standard deviation of the stock and they decide whether the stock is close to or away from the mean.
It is important that you follow one of these analyses and have your own viewpoint on the stock. It does not make sense to blindly follow an analyst and invest based on tips and recommendations.
What after having a point of view?
If the point of view on the stock, the source is bullish then you could buy at the spot price or choose to trade in the futures or the options market. Thus it is now time to decide which instrument you would want to trade in. It is important for you to be profitable and to be able to manage your risk.