How to Trade Stocks: The Objectives
Some basic things you need to know
The objective of this site is to introduce the reader to some of the factors that can be considered in the process of making a decision to buy or sell a stock or a stock option when operating not as an investor but as a trader. To learn how to trade stocks it is necessary to become familiar with, and to gain an understanding of, the daily market-related information and the sources from which it is readily available, often represented graphically. That is the objective.
Trader or Investor, what is the difference?
It is a matter of emphasis, with the trader on stocks as the trading entity and the investor as a shareholder in a corporations. The major difference being that the trader wishes to make money from the movement of a stock, up or down, usually with a relatively short-term involvement and the investor most often takes a much more in-depth approach and stay with an investment for a longer amount of time.
The Trader
Successful stock trading depends on the ability to forecast what will probably happen regarding a stock and a stock market. And the forecasting process is derived from an interpretation of many events of the past with the expectation that there is a high probability that the patterns of the stock and the market in reaction to those repeated events in the past will be again repeated as new events occur. The past fluctuations of the market and individual stocks that have taken place until the present day can be represented graphically by a chart that displays a variety of attributes and activities. In this way, much significant information becomes available to those who know how to interpret the activity portrayed.
The trader is more affected by the activity that occurs as the market fluctuates in response to many day-to-day factors, reactions to related corporate news, general market conditions, supply and demand, short term news, global events and a myriad of other uncertainties as they play out over the short-term. The trader is more likely to depend on, at least to some degree, what has come to be known as “technical analysis”, much of which can be made from a review of charts of the stock’s past activities and charts of the market activity which show graphically the state of the market in which the stocks trade
. That can be complicated but there are some simple and basic approaches that can easily be learned with practice and patience. Frequently the trader will operate without the aid of a stockbroker and to do so, it is necessary to know how to trade stocks online, not difficult to do.
The Investor
The investor buys stocks, becomes a shareholder, in companies he or she believes have the likelihood of growth and profitability so that the shares of the company will gain in value as more investors are drawn to become shareholders in that company. The investor usually accepts the need to hold a position for much longer time periods than would be that of the trader.
The investor’s decisions are usually based on a review of the fundamental properties of a company. Those would include the company’s assets, its historical profitability and its current performance, and prospects for future profitability. Other aspects might be to review the balance sheet and company management to see how the profits and assets are managed and distributed, all of which takes time and experience.
In conclusion
So this site adopts the stance of the trader and will identify some basic indicators depicted on stock charts. Analysis of stock charts is not a science, there are so many variables and possibilities to be considered, but they do help focus attention on relevant factors so we will discuss some general guidelines that help interpret the data represented that relate to stocks and market performance.
We will test ourselves when we examine some individual stocks to see how well our earlier chart interpretations hold up, those that we choose for “pretend” trades for illustration purposes. That should be of value in meeting our objective to learn how to trade stocks.
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