Stock Market Basic to Advance - Lecture 3
A) Different types of
Trading Styles :
Everyone has different trading style depending upon view, approach on market. Also everyone has different Risk management techniques. So my honest suggestion is do trading as per your capability with strict stop loss. Now, let’s discuss what the various Trading Styles are
1. 1. Intraday / Day Trading:
- In this type of trading style, trading and making profit is done within same day.
Or
Involves buying and selling financial instruments within the same
trading day.
- Traders aim to capitalize on short-term price movements and make profits.
- (Majorly
candlestick time period 5 or 15 minute is used by the traders in this trading style)
- Positions are usually closed before the market closes for the day to avoid overnight exposure to market risk
2. 2. Swing Trading :
- Involves holding stocks for more than one day
but less than a month.
- Traders aim to capture short to medium-term
price movements, typically within a few days to weeks.
- Majorly
candlestick time period hourly or daily is used in this trading style patterns to identify potential entry and exit
points.
- Positions are held for a longer duration
compared to day trading, allowing traders to ride the momentum of price trends.
Stock Market Basic to Advance - Lecture 3
3. 3. Scalping:
- Making profits within seconds in one or two candles
Or
Involves making quick trades to capitalize on small price movements.
- Typically, traders use 1-minute candlestick
charts to identify rapid price changes and execute trades.
- Within
few minutes or seconds trade can be exited with whatever profit or loss.
- Traders aim to profit from short-term price fluctuations, often within seconds or minutes.
- Scalpers prioritize high trading volume and liquidity to enter and exit positions swiftly, regardless of the profit or loss magnitude.
4. 4. Investing/ Position Trading:
- Involves holding stocks for an extended period,
typically months or years.
- Investors aim to generate wealth over the long
term by buying and holding fundamentally sound stocks.
- Trading decisions are based on fundamental
analysis, focusing on a company's financial health, growth prospects, and
industry trends.
- Investors often use daily, weekly or monthly candlestick
charts to analyze long-term price trends and make informed investment
decisions.
Each trading style has its advantages and disadvantages, and traders/investors choose the style that aligns best with their risk tolerance, time horizon, and financial goals. Additionally, risk management, including the use of stop-loss orders, is crucial regardless of the chosen trading style to minimize potential losses.
B) What Stock Price Moves?
Basically,
Supply and Demand Or Buyers and sellers moves the market.
Example
If
shopkeeper having supply of only 10 chocolates and there is demand of 100
chocolates then price moves up as supply is less than demand. Similarly, if
same 10 chocolates are available at shopkeeper but there is no one to buy then
price moves down as there is supply is more than demand.
Similarly, this fundamental
principle of economics applies directly to the stock market, where the price of
a stock is determined by the balance between the number of shares available for
sale (supply) and the number of shares investors want to buy (demand). When
demand exceeds supply, prices rise, and when supply exceeds demand, prices
fall. This dynamic interaction between buyers and sellers ultimately drives
stock prices up or down.
C) Factors which affects
on demand and supply are:
- Company-related
News: News about a company,
such as earnings reports, product launches, mergers and acquisitions, or legal
issues, can significantly impact investor sentiment and influence demand and
supply for its stock.
- Company
Performance: The financial
performance of a company, including revenue growth, profit margins, debt
levels, and future growth prospects, can affect investor confidence and drive
demand or supply for its stock.
- Emotional
Attachment/Investor Sentiment: Investor sentiment, which can be influenced by factors such as
market rumors, social media chatter, or overall market sentiment, can play a
significant role in determining demand and supply. Emotional factors like fear,
greed, optimism, or pessimism can lead to irrational buying or selling
decisions.
- Economic
Factors/Fear: Broader economic
factors, including interest rates, inflation, unemployment rates, GDP growth,
and geopolitical events, can impact investor confidence and influence demand
and supply for stocks. Economic downturns or periods of uncertainty may lead to
increased fear and reduced demand for stocks, while economic growth and
stability may boost investor confidence and drive demand.
Additionally, other factors
such as changes in industry trends, government policies, regulatory changes,
and global events can also affect demand and supply in the stock market.
Overall, understanding and analyzing these factors is essential for investors
to make informed decisions and navigate the complexities of the stock market.
