Trading Styles
There are many different styles of trading but ultimately you will need to decide if you are trading for the Short Term, Intermediate Term or for a Longer Term time frame.
Each style is has an objective to make a profit from the markets but dependent on whether a trader is looking to get in and out of a market very quickly or by holding a position for longer periods of time.
A short term trader may be seeking to profit from a market movement on an intra-day basis whereby they may be in and out of a market within seconds to minutes. A longer term trader may hold a position from weeks to months.
You will need to decide on which time frame is suitable for you personally. Take into consideration how much time you have available for trading the markets. If for example you have a few spare hours in the morning or evening then you might want to consider short term trading. If on the other hand you have more time on your hands and believe that a particular market is going to make a substantial move which may last for several weeks then of course this would be suitable for individuals who are able to ride out the longer term trades.
The next area to consider is if you are going to use Technical Analysis or Fundamental Analysis.
Technical Analysis
Simply out Technical Analysis is a way of looking at the markets using Charts.
Technical traders believe that ultimately the relevant information is factored into the price of the market. They will often use Price, Volume, Patterns and Indicators to forecast market moves.
In this school of thought, traders believe that past price patterns can be used to forecast future moves and using historical studies as a foundation, one can find a positive trading edge to trade with.
There are thousands of technical methods one can choose from but instead of looking for the Holy Grail, one should focus on Risk Management and Trade Management.
Fundamental Analysis
Fundamental traders seek to find value and tend to be geared more to the longer term time frames.
Most fundamental traders will tend to incorporate a form of a top down approach by looking first at the Economy followed by the Sector and then the Stock. They may also consider looking at financial statements to derive a stock’s current fair value and forecast future value.
Fundamental traders may also seek to keep an eye on analyst and broker recommendations as well as PE ratios and Interest Rates to form an evaluation on the current price.
Technical or Fundamental
Whether you decide to use Technical Analysis or Fundamental Analysis as your approach, the most important aspect to always keep in mind is that one may not be better than the other but rather which method is suitable for your own personal approach to trading the markets.
