Trading in the stock market can often be tricky. One has to be able to make swift trading decisions, especially in a volatile market. As Kavan Choksi / カヴァン・ チョクシ says, traders must try their best to keep up with current events and understand how they may impact the stock market. The priority of a trader must be to spot good trading opportunities in the market.
Kavan Choksi / カヴァン・ チョクシ sheds light on ways that can help spot the best trading opportunities in the stock market
Stock market traders must firstly have the capability to identify strong and weak stocks. Strong stocks basically are the ones that do move in the direction of the trend, however, with greater vigour than the overall market. On the other hand, stocks that move with the market trend but at a slower pace than the market in general are considered to be weak stocks. Traders may identify the trending sectors and subsequently identify the outperforming stocks within those sectors. They may even opt to check for stocks with higher returns in comparison to their peers and the broader index. During a sideways or consolidation in the market, however, volatility would be low and hence there shall be fewer trading opportunities.
Traders need to carry out proper research on the stocks they want to trade. This would involve closely monitoring any significant corporate actions in the company, like dividends, earnings and more. Events like these can have a significant impact on the stock price. Hence, traders must train themselves to spot such positive or negative surprises well before others to be able to cash in on the sudden price movements.
Traders should try their best to gain a better understanding of the price patterns, trends and behaviour of the stocks they want to trade. It would be a smarter choice to trade only with a few stocks at the start. These can be certain select stocks or a set of stocks one is comfortable to trade. Having a small number of stocks in the portfolio can help make sure that the trader can focus on each of the stocks on the list. This ultimately eases the process of researching and tracking them. Some traders also prefer trading only in indices.
As Kavan Choksi / カヴァン・ チョクシ says, traders must be aware of all the information and developments that may impact stock prices, and hence keep an eye on the key economic, political, national and international, micro and macro factors that may affect their shares. Some of these developments are analysts’ projections of the stock based on the company’s earnings performance. Quarterly earnings attract significant attention from stock market analysts, who evaluate the company’s performance against their estimates and share their opinions on the stock. A favourable analyst outlook can drive the stock price up, while a negative outlook can have the opposite effect. The period following an earnings announcement and analyst review might present a trading opportunity.