I still recall my first encounter with stock market, there’s a ton and ton of jargon to learn. Most are straightforward, with some of it depends on your style or approach (how you buy and sell stocks) to stock market. Are you seeking fast return, or a gradual capital increment suit you. Of course, there is no fixed styles, you can even stick to a hybrid combo in respect of your work/family commitment.
So what is Investment and Trading all about?
Although the main aim of both trading and investing is to secure your profit in the financial(stock, commodities, currency pairs, index or other instruments) markets, but the main differences will be Time frame and Method of Analysis.
- Time Frame
The goal of a investor will be to build wealth over an extended period of time by buying and holding on a portfolio of stocks, mutual funds, ETF, bonds and other investment instruments. A trader, on the other hand, involves a more frequent and aggressive buying and selling of stock, commodities, currency pairs, index or other instruments, as to secure profit within a shorter time frame.
- Method of Analysis
For Traders, they often use technical analysis, such as moving averages, stochastic oscillators and etc, to assist them in determine the entry and exit point for a chart, where investor relied on fundamental analysis to filter off hundred and thousands stocks and to discover the gems.
Which Style will be better?
Some reader had asked me which style will be better to build wealth, but it all boil to your account size, amount of time that you can dedicated to trading, level of experience, personality and risk tolerance. All roads lead to Rome, it just a matter of times.
What is my style?
As for me, i use both style in both. In short, i combine both TA and FA in my Trading and Investing. For example, both TA and FA will be used for my index trading with a timeframe ranging from minutes to hours. And i seldom hold any index position overnight as I treasure my sleep.
Reports like the GDP, Consumer Confidence Index, Interest Rate will be considered as FA for me. Reason being that those reports give you a good indicator of the general financial status of the country and plus the rest of associated economy bodies. For me, i relied on http://www.forexfactory.com/calendar.php for such information. The recent Controlled QE by China has ignited the bull spark in long-depressed stock market. For any QE that increase liquidity from the Central Bank, it has the tendency to boast up the country stock market. In this case, will you think it will be a better idea to long or to short that market? Of course the stock market will dip at some point, but you will probably secure more profit for long position.
We have China, Japan and recent QE move by Europe to join in the fun, i noticed this defy sign among countries that release QE. EUR drops. YEN drops. Only RMB dollar rallied!
As for TA, i use supply & demand, support & resistance, moving averages, stochastic oscillators, fibonacci and plus Wyckoff Trading Method. All these methods, you could easily google it in detail, but you wish to discuss with me in detail, do feel to email to me email@example.com. We could even do a live index trading together.
My 2015 battle plan
After analyzing the world economy and the recent transfer of wealth in Oil sector, i will be focusing on the following markets and sectors.
- China Stock Market (With Shanghai and Hongkong interconnected, you could get any China “A” Share listed companies from Hongkong stock exchange)
- Property in Japan (With QE in place, property in Japan will be boasted)
- Energy sector
- Gold (With more and more countries join in the QE wagon, it seem like a lot of countries are desperate to pop up their economies. Danger will be lurking around the corner when the QE party is over)
- USD currency (US has been maintaining near zero interest rate for a long time, and it almost certain that US will increase interest rate this year and that will attract investor back to USD.)
- CASH – Last of all, do not get emotion attached to any holding, close your position/s except for Gold when there is sign of crises. As Cash is king!
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