Back in my early months in the stock market(yes I am only about three years in this passive income generating source) the topic that we discuss in our little stock investing forum in www.kerygmafamily.com/forum is whether you are technical or fundamental type of investor meaning if you employ technical analysis or fundamental analysis in doing your stock trading transactions.
Being a CPA it is normal for me to first check out the FS(Financial Statement) of the company and employ ratio analysis. Main things I use to check is a company’s ability to generate income and stability of the company. On the other hand technical analysis focuses on chart reading and interpreting such chart formation to determine the stock’s performance base on such chart formations.
As of today I employ both.
But the fact is there is no exact technique that one should be following. Each person or trader/investor has a particular style that only he/she can truly be good at. There are so many styles in trading and the thing is lots of newbies always ask me what should they be doing. Should they spend hours and hours comparing various ratios or should they figure out whether the stock has already formed a cup and handle before deciding to sell the stock? Answer is it’s up to you.
Stock investing is look at something that is too technical that only the geeky and the brainy guys or gal can do it. Also at times lots of newbies get burn so to speak and thus started to slow down and in the end abhor the equities because they lost lots of money.
Stock investing/trading is something that one should look at as a puzzle. Yes a puzzle.
At first it is hard to figure out thus the only way for you to learn is by trial and error.Since it is trial and error the advice I give to newbie stock investor is first just to open an account and try stock trading game(check out the PSE’s Stock Trading game here or this http://tradingdoors.com/). You can only learn by your mistakes. At times reading so many books might even mix your brain up and thus lead you to an erroneous buy or sell. You got to experience it as nearly as the real without using your own real money and thus a stock trading game is the perfect training ground for you.
Your “aha” moments will come and finally figure out the puzzle that from solving it in a day you get to solve it now in 25 minutes. Practice not only makes you perfect but it hones your skills. You get to learn new things about the puzzle or in this case the stock market for every mistake you make. As they say for all the mistake you made just charge it to experience.
While doing that I guess you get expose to terminologies that as we term it make your “nose bleed.” You got to learn those terms so that you will be guided when actually trading. And as you go further read stock trading materials like the business section of the newspaper(yes the business section not the lifestyle section or the entertainment section), books about financial literacy, websites about financial literacy and investments, and of course blogs and forums about personal finance and investing like Investing in Philippines(yours truly) to catch up with what is happening in the stock market.
Be mindful though that as an investor you should not let your emotions fool you because the stock market is actually influenced by the emotions of traders. If you let yourself get caught in the emotion you might fall to the bad side of it and never recover.
Now let’s set things clear. There is no particular stock technique or style that you should be following but the style that you established. As time passes you will soon realize that you are good at trading property stocks rather than holding companies or mining stocks. At times you profit more when you do short trade rather than waiting for a dip in the stock’s price and holding it till it reaches your target price. And at times you are better at screening stocks and buying them at targeted price, accumulating every drop in price, and selling them at bull run or trending market.
There is a big difference between you and me or between you and the jockeys or fund managers. One big thing I know is that the are trading with billions or even trillions of pesos while we only trade at thousands of pesos. So don’t be hard on yourself.
Yes the best time to enter the equities market is now(because as time passes you are lose opportunity) but always learn first the ropes before you get your feet wet in the stock market.