We can find a number of stocks listed in a stock
market. Choosing an appropriate stock that too, at an appropriate time, out of
those huge number of stocks, is really a herculean task.
Retail novice traders normally randomly pick a
stock by hearing some news or getting tips through SMS or on social medias. Beginners,
who have actually gathered some knowledge on stock market through books or attending
seminars or trainings on stock market, also pick the stocks based on their limited
knowledge. Some people take the trade based on news and some people take it on the
basis of technical chart analysis. Some people also put random amounts on stocks
they buy. With limited knowledge and temperament on stock market, the retail investors
or traders use to fail in the long run.
Some trainers say Fundamental Knowledge is a must
and some say only Technical Chart Analysis is good enough for one’s sustenance
in the stock market. So, the question is what knowledge is required for a
person to be successful in stock market.
Before deciding on the knowledge area, one should
know about different type of activities available in a stock market which a
normal retail person takes chance on it. They are:
Stock Market Activities:
- Short Term - called as Trading (Buying and Selling happens for a limited period may be in a day or few days or weeks).
- Investing (Longer Term) - Called as Investing (Holding a stock for a reasonably higher period of time may be more than 6 months to many years).
In each of the above area there are again different types of segments one can deal. They are:
- Cash - One can buy 1 to any number of quantities of any stock.
- Futures - Not all but only specific stocks are traded in this market and buy or sell happens on the lot size.
- Options - Option trading deals with the trading of contracts and not the actual stocks. This is allowed only on the stocks which operate in Futures market and buy sell of the contracts happen only on lots.
People who are successful in stock market do the above activities which suits to their personalities. Some are comfortable with Cash and some trade in Futures and Options (FNO) segments. Some do day trading and some prefer long term investments.
Technical charts may be referred to when one trades for a short time period but when the question comes about long term investment, then Fundamental knowledge is very much required.
We will publish insights on the related topics in our coming publications.
Thanks for reading.
