Navratri may be coming to a close, but it’s only the beginning of the festive season. As you wind down from the Navratri celebrations and relax a bit before gearing up for Diwali, you may want to take a look at the trading opportunities that the festive season brings with it. While you’re at it, here are 9 trading strategies that can help you make good trading decisions.
#1: Accept the ups and downs of the market
The market has its ups and downs. The sooner you come to terms with it, the better you can understand and anticipate trends in the market. Technical analysis can be extremely helpful in this regard. You can use both ups and downs to your advantage by going long or short, as needed.
#2: Research is very important
Research is the backbone of trading and investing. If you’re a trader looking to capitalize on short-term market movements, technical research is the holy grail. For long-term investments, fundamental analysis holds the secret to making good investment decisions. Here’s where you need to learn to read annual reports, analyst reports and financial statements.
#3: Determine your time horizon
Some traders are in the market looking to make short-term gains, while others are keen on benefiting from long-term growth in certain companies. This also depends on the time horizon of the financial goals in consideration. Do you want to make a quick buck to take your dream vacation in a few months, or are you interested in a long-term goal, like saving up for a house? Your trading strategy depends on the time horizon of these targets.
#4: Determine your risk appetite
When it comes to the stock markets, high risk is generally correlated with higher returns, although they’re not steady. The possibility of losing greatly is also high. However, with low-risk strategies, the possibility of small but steady returns improves. Determine the level of risk you’re comfortable taking, and formulate your strategy accordingly.
#5: Develop an interest in economic news
Before you trade or invest, it’s not enough to merely read up about the stocks on your watch list. The larger economy also has an active relationship with the stock market. Events of national and international importance can influence the market movements. It helps to develop an active interest in economic news, so you can understand the markets better.
#6: Be prepared for bear markets and recessions
The market moves in cycles. Bull markets are followed by bear markets, and so it goes. So, if you’ve had a good streak in the markets consistently, remember that this is not likely to be the ongoing trend. A bear market may be in the offing. And the occurrence of impactful economic events could even lead to a recession. So, always be prepared for a downturn.
#7: Examine your mistakes when they happen, and learn from them!
Nobody’s trades can be perfect 100% of the time. Mistakes are as common in the markets as good trades – perhaps even more so. Even the most seasoned traders and investors are likely to make a wrong trade. If this happens, it’s best to revisit what went wrong, so you can learn from your mistakes and refrain from repeating them.
#8: Become comfortable with ratios
Ratios are important if you’re looking for good companies to invest in. It’s a good idea to learn what ratios like P/E ratio, debt-equity ratio and some other key metrics mean before you make a decision on what stocks to hold. Get comfortable with these metrics and look at how the ratios of different companies compare.
#9: Trading is a rewarding but gradual activity, so manage your expectations!
Trading is not the answer to earning rewards overnight. It’s a gradual and ongoing journey – one that has ups and downs. So, make sure you align and adjust your expectations accordingly. That way, you can never get too carried away.
These 9 trading strategies can help you get a head start into trading well. Make sure you constantly hone your trading skills along your journey, so you can remain at the top of your game.
Stock pick : Cholamandalam Investment (Target INR 290)
Cholamandalam Investment & Finance is part of the Murugappa group and has a diversified product portfolio spread across vehicle loans, LAP, SME and home loans. The company also has a diversified geographical presence and strong rural focus and which is helping them to capture growth in LCV, tractor and two-wheeler segments. Adequate capital adequacy of over 20%+ and declining trend in Cost of fund and loan loss provisions provide comfort.