Fundamentals
Fundamental Analysis
Fundamental analysis takes into consideration all that is going on within the global community, the economic climate and within sectors. Fundamental analysis also deals with the balance sheet of individual companies. This latest economic crisis has highlighted how closely we are all inter-connected now, as one country after another has headed closer or deeper into recession.
Economic Cycle
The economic cycle is set by institutions or policy and comprises fluctuation in activity, in growth, decline and stagnation of cycles of real estate, stock market, business growth, exchange rates and interest rates. Calculating where we are currently in the economic or business calendar can assist you to understand what is happening in the market and determine where we are headed next.
Stock Market Cycle
Similar to the real estate cycle of boom and bust, the stock market has cycles also. These are typically referred to as a bull market or a bear market. At times there is sideways consolidation of price action. Keeping informed of economic and business news and agendas, together with viewing price action on longer-term charts will assist you to easily see the rising, falling or sideways trends and adjust your portfolio accordingly in order to maximise profits and minimise losses. Institutions set the trends and always remember that the trend is your friend.
Bull Market
Markets are referred to as bullish if stocks are generally rising in price.
Bear Market
In a bear market, the trend is down. Stock prices are falling. Bear markets are generally swifter and more savage than bull markets.
Market Sentiment
Fear and greed are emotions that influence the rise and fall of the market which traders and investors need to master. When things are going well, these emotions often push the market that little bit further,with traders trying to make the extra dollar or afraid of missing the opportunity of additional profits or covering themselves driven by the fear of a market collapse.
Often markets move faster in a bear market as panic and fear of loss grip many investors and they sell. It is often said that success as a trader is 80% mindset and 20% skill. Successful courses will address the technical skills to become a trader and also help you develop a winning mindset and understanding your own risk tolerance.
Trading Plan
A trading plan will assist you to become a successful trader and investor and help control emotions of fear and greed to be able to buy low, sell high, make profits and minimise losses.
Trading Diary
A trading diary is useful to help you review your trading strategy. New traders are encouraged to paper-trade for a few months before putting real money into the market. Many providers have online Trading Simulator software to make paper trading more realistic and fun.
See the section on mindset to help you with the psychological side of becoming a winning trader.
