Single stock trading strategy
A trading strategy is something without which it is impossible to work in the stock market. Without a trading strategy, trading turns into a game of chance for the sake of adrenaline, not profit. Therefore, the importance of a trading strategy cannot be exaggerated.
What is stock trading
The stock exchange and trading on it are organized on the principle of intermediation between the buyer and the seller to ensure the safety of the transaction. Transactions are carried out according to the established rules and schedule, in full compliance with the law, with mandatory registration and control. For legal entities such activity means attraction of funds for production and development; for private individuals (traders) it means investment of their savings for getting additional income.
The difference between the stock exchange and the currency exchange is that there is no round-the-clock trading on the securities market. Another difference is in the peculiarities of price movements. Depending on the performance of this or that corporation, its shares can rise in price by thousands of dollars in a few days, as well as fall. The price movements of various currencies are not as rapid. Only in the event of serious economic shocks can there be a collapse in exchange rates, but it still cannot change the value of a currency the way it does in the case of securities.
Stock exchanges are tangible, they are large buildings, located in the largest cities in the United States, Germany, Britain, Japan, Australia and other countries. The Forex currency market is mainly represented by the Internet space. There is also a difference in commission.
Shares of companies (securities) are issued for sale on the stock exchange, which is an organized market in the form of real or Internet platforms. The sale takes place within the framework of unified requirements with regard to the terms of the transaction and the quality of the goods. At the heart of any bargaining is the counteroffer of the various parties.
The main tasks of exchanges are:
- Streamlining, organizing currency, commodity markets;
- Unification of trade processes;
- Control of demand, supply, exclusion of unforeseen changes, which may affect the welfare of sellers, buyers negatively.
The sale of company shares (as well as any other trades) is characterized by publicity, openness and free pricing. The state does not interfere in the process, which, however, is carried out only within the framework of existing legislation. The main source of profit for stock exchanges is the commission fee from each concluded transaction.
Today there are more than 500 trading floors, the largest of them:
- London Metal Exchange;
- Singapore Foreign Exchange;
- European-American NYSE-Euronext;
- St. Petersburg Stock Exchange; Moscow Stock Exchange.
To start trading stocks in Kenya, you need to register with a broker.
How to trade stocks
There are several reasons for choosing to trade stocks on the stock exchange. They are partly psychological, because they provide the investor with tangible guarantees of return on investment. But there are also objective factors. For example, all securities have liquidity due to tangible assets: real estate of an enterprise, its raw material and commodity stocks.
The following is also attractive:
- The share price does not depend directly on the value of currencies, commodity stocks (trading is less dependent on interventions on currency pairs due to lack of correlation).
- Crisis in the country or world market may not affect individual companies (unlike national currencies).
- Investments into assets of large companies are easier to forecast than changes in cryptocurrencies, precious metals.
You can learn how to trade stocks on the exchange from scratch by using a demo account. The approach allows you to study the main trends and choose an effective method of earning. And this without the risk of losing real money, all losses or profits remain virtual.
There are some rules for successful stock trading:
- The most basic thing you should start to do in learning how to trade stocks is to learn the theoretical part. Learn all the words and terms and you will feel much more confident.
- Decide on your investment objective. You don't need to spread yourself thin, and try to do everything. Choose one direction, and work closely with it, study the information and subtleties of your goal.
- Do not forget to monitor the micro and macro-economic situation, not only on the stage of learning to trade stocks, but also afterwards. Always be aware of all what is happening in real time. It is a good idea to make it a habit to check stock news and forecast websites on a regular basis.
- Do not start with real trading. Trading stocks is not a cheap pleasure, and going to the auction without the necessary knowledge and practice is pointless. Start with a demo account.
You can use other criteria of classification or just to specify the proposed points. Try yourself by signing up on a trading platform.
How to choose a stock to trade
Before you trade even a share, take a training course at the broker.
Many novice market participants believe that in order to make the right choice of shares for trading and investing it is enough to carefully review annual reports of companies; compare competing companies with each other in terms of profitability, profitability and regularity of dividend payments; finally, analyze the current balance sheet, assess the risk of investment by calculating the book value of shares and comparing it with the market value. In reality, things are not so simple. Experience shows that not only can the market value of a company's common stock not rise, but it can fall even when the book value of the company's stock is rising. And even when there is no doubt that the company will make steady profits and pay regular dividends in the future.
Rules for selecting stocks for investment:
- Choose stocks with smooth price movements. Pay attention to the liquidity of the stock and volatility it will help you with the selection of the right stock to trade.
- You need to pick stocks to trade from a price range of $15 to $75. There are bound to be profitable moves here. As you become more confident in trading, try to keep the momentum going upwards, taking out cheap stocks and adding in slightly more expensive ones.
- In order to select a stock to trade, you need to use not only charts but also technical analysis. Your task is to study as much as possible the companies you want to work with.
- You should not trade the first 15 minutes of the stock exchange opening. You risk losing all your money, remember that.
- Choose a stock with capital over $300 million, and pay attention to companies with a capitalization of more than $ 1 billion. In this company you can be sure, if the global investors have trusted it with their money. Also conduct an analysis of financial condition company.
- Pay attention to the company's financial statements (profitability, competitiveness), also not an unimportant point in choosing a stock of a particular company is dividend payment dates.
- Analysis of trends. This method is used to determine the deviation from the base plan by cost, timing, or content, using data from previous reporting periods. Trend analysis will help you predict the costs and revenues of the company in the next reporting period, thereby identifying all the strengths and weaknesses.
How to trade one stock - single stock trading strategy
All stock trading strategies are divided into short-term, medium-term and long-term.
Short-term strategies (including scalping and day trading) involve transactions opened for a short period (from a few seconds to a week), medium-term ones have a horizon from a couple of weeks to several months, and long-term ones involve transactions from a year or more. You can try it by registering on the brokers platform.
Breakout of the price level
This one stock trading strategy of the most common options. At the same time it is most often argued about. Here levels, highs and lows are taken into account, which immediately catch the trader's eye. For example:
- Daily highs and lows.
- Local highs and lows.
- Support and resistance levels.
- Rounded price values (35.00; 12.50 etc.).
The essence of this single stock trading strategy of trading stocks identify the direction of movements: the price will move in the direction of the broken significant level, in which the graph has rested up to a certain point. At the same time, the trader should be very attentive as false breakouts and price reversals are possible. After the penetration of an important level, it is optimal not to enter the market immediately, and to wait for confirmation, for example, when you see an increase in volumes.
All transactions take place only in the direction of the trend. In an uptrend we buy a stock near support and sell it near resistance. In a downtrend, it's the other way around. For the currency market, upward and downward trends are the same, for the stock market, upward trends are usually stronger. This is due to fundamental factors consolidate.
Trading inside a sideways channel
A sidewall is a side channel. You buy shares above support and sell them below resistance. This type of trading requires a long range and it is better to use limit orders.
Top or bottom pick
There is an opinion that the retracement will not constantly fall or rise. A trader buys a stock after its value declines or goes short after it rises. In this stock trading strategy, be sure to consider historical highs and lows, "round" levels, and volume values of price peaks.
It is no secret that many indices are directly or inversely correlated (correlated) to stocks. For example, direct correlation implies an increase in the value of stocks with an increase in the value of the index. The reverse is the opposite. There are also shares, which are in no way correlated with indexes. Conclusion - follow the indexes and wait for the stock price stalling out duplicate their movement to stocks, buying or selling assets.
Trading in baskets
Basket - a certain amount of shares of different companies, when there is a considerable correlation with the indices. Such stocks form a portfolio that can be bought or sold with the click of a button. This one stock trading strategy requires not only good preparation and attentiveness, but also proper basket construction.
The most appropriate stocks for trading in Kenya
Before you trade even a share, take a training course at the broker.
Stocks are probably the most common investment instrument. And they are great for beginners and professional investors alike. Let's figure out how to choose and buy the best stocks in Kenya.
- Choose the company's field of activity.
The choice of industry should be based on your interests and experience.
- Research companies in your chosen field.
Compare companies in the same industry: it may be that the dark horses are performing better than the established industry leaders.
- Check out the company profile.
Scrutinize all available information about the company How has it evolved? How has it transformed? How have important past events affected the movement of the company's stock? What are its plans for the future? Quite often the vector of the company's movement in the past determines its development in the future. Pay particular attention to income statements.
- Explore the company news.
A company's plans have a direct impact on your return on investment. If the company plans to launch a new product, if it has made a discovery, it can play into your hands.
- Examine the dynamics of the company and the industry.
Evaluate the dynamics of the company and the industry in which it operates over the past few years. If the growth rate is declining or even worse has become negative, you should not look in its direction.
- Read analytics.
Major investment banks regularly publish their own recommendations.
- Pack your briefcase.
The most active stocks in Kenya:
- Robinhood markets, Inc.
- Coinbase Global, Inc.
- BlackBerry Limited.
- GameStop Corporation.
- AMC Entertainment Holdings.
- Virgin Galactic Holdings.
Most of the active securities sometimes show extremely high volatility, at other times price movements are slow and volatility is almost non-existent. The most common period used to evaluate stock activity is one trading day.
Choose a professional trading platform with features such as real-time quotes viewing, professional charting, real-time project monitoring, automated trading, market scanning, testing and much more. Learn, read, follow the news. Remember, victory goes to the brave. Believe in yourself. You can do it all!