The secret of trading, lies in three basic facts, simple logic, application of some simple economic policies and finally amassing knowledge. These principles, if applied effectively, can easily become the best trading strategies, revealed to the world. Some of the trading strategies that work, have been discussed in the following paragraphs. These strategies have been explained are simple in nature and can be used by any person, who has just begun the process of trading.
Trading Strategies From the Viewpoint of Economics
There are several different theories regarding trading strategies that are published on the Internet, different books and also in several different publications. Such strategies are pretty complicated and if you are a beginner in the field of trading, then I would recommend you to take up some simple readings such as the Wealth of Nation by Adam Smith or for that matter any other book that explains the basics of macro and micro economics. The advantage of studying these books is that you will understand the logic of market mechanisms, and most important of all, you will also develop a good 'reflex'. For example, when you see a particular change in the market value of a share of a company, you will immediately list out the possible reasons that cause such a change. This can happen, only of you study the logic of economics and in addition to that, also get to know the different economic and business cycles.
Studying some important finance and accounting theories also proves to be helpful. The balance sheet analysis, return over asset ratio, credit rating, credit history are some of the most important calculations and concepts that one should definitely know. Simple, elementary calculations are usually used in such cases and mastering these techniques is not at all difficult.
Trading Strategies for the Forex Market
The forex trading is basically at a higher degree than the normal stock trading. Trading in the forex market is a bit risky and also difficult as you are dealing in the rise and fall of currency rates of two different national economies. Here are some small but genuine tips that any person can comprehend and also use. So, here goes...
- Before you actually start trading in the market, take up some 'ghost trading'. Ghost trading is basically predicting or forecasting some of market values on your own, without actually entering the market. For the purpose of ghost trading, you may also start-up a free forex demo account, with the help of which, you can learn trading.
- Studying the national economy of the currency in which you are trading is a very important groundwork that has to be laid down. Make sure you know all possible things about the economy, such as current trends, fiscal and economic policies of the government, long-term and short-term foreign trade and the basic occupations of the people. For example, the currencies of agrarian economies grow after harvest. You may also refer to prices of gold, silver and crude oil in the country, whose currency you are purchasing and selling.
- Mean reversion, technical analysis, fundamental analysis, volatility, etc. are some of the techniques that are followed by many traders. However, it is important to have an overview of the economy, hence if you are using such techniques, then it is essential to observe the overview that includes national income, GDP, GNP, inflation, depression, recession, etc. It is also advisable that one sticks to only a few economies such as one developed economy and a few agrarian economy or two developed economies.
Trading strategies also includes some important policies that can be used in the process of trading in stock market. Again in the stock market, the best stock trading strategies for beginners include balance sheet analysis, amassing and updating knowledge and ghost trading. The amounts that are needed to be invested in the stock market are a bit mellow, but losses can be painful.
- Before you start the actual trading, first get to know about the companies that you are dealing in. Learn to read the balance sheets of these companies, final accounts and research upon the trends of these companies.
- Another very important skill that you need to master is forecasting the demand and supply of the shares that you want to purchase or sell, as the demand and supply, dictates the pricing of these shares. This is a very complicated skill, and it requires quite a number of years to gain mastery over it.
- Trading strategies for capital markets can be also developed by learning about the field in which the company usually operates. The performance of the company in that specific field, also dictates the value of the company's shares and the share price of competitors.
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