subject: What Should I Learn To Invest in the Stock Market? [print this page] What Should I Learn To Invest in the Stock Market?
Every investor begins his activities in the stock market with much study, dedication and discipline. It is virtually impossible to become wealthy or successful in the stock market without knowing anything about it. Those who try to venture out inevitably lose their savings and leave empty-handed in the end. At this point, that famous phrase of the billionaire investor Warren Buffett comes in handy:
"The market, as well as the lord, helps those who help themselves. But the market, unlike the lord, will not forgive those who do not know what they're doing."
So how to find out EXACTLY what to study to learn how to invest in stocks? That's what will I explain in this article.
Two Paths
Before investing in the stock market, you must choose between two different paths. The technical way, speculative, filled with graphs and mathematical tools and the other, fundamentalist way, where company reports, economic data and growth factors go hand in hand.
There are positive points and negative ones in each. But to find out which one matches most with your investor profile, you need to know a little bit better about your options.
Technical Analysis
Also known as TA, is the study of financial assets taking into account only their prices and trading volumes. Traders use the TA to find the best time to buy or sell a stock. And of course, where they exit the investment when things do not work.
There are endless combinations of technical tools that can be used to find points of entry and exit of an asset. You can use moving averages, MACD, Relative Strength Index and so on. Some like to analyze the trend lines, Fibonacci sequence, candlestick patterns of exotic names like "3 Soldiers" or common graphics standards such as the famous "Shoulder Head Shoulder."
Those who uses AT, typically invest in short term. Eventually, you can spend several months with the same stock but this is uncommon. Among its drawbacks are the costs. As the AT is more for the short term, the brokerage fees can accumulate. So be aware of that.
So, if you like systems, numbers, and to detect hidden patterns, using the graphical analysis in your operations may be your best option.
Fundamental Analysis
Those who buy stocks for the long term because they believe in the potential of the company that issued these shares probably will do well with the fundamental analysis. This type of investor is more like a businessman than to a systematic trader. I say this because the fundamentalists analyze economic factors of enterprises, state growth targets for the future, dividends, interest on capital and more.
Sadly, many are prejudiced against the fundamental analysis because they do not know how to use it. They think that holding a stock forever is dangerous because it can lose its entire value at once in case of something bad happens. The funny thing is that this sort of thing happens, yes, but only with companies that wouldn't pass a the criteria of a well done fundamental analysis. That is, it is dangerous to buy stocks in that way only if you do not know how to invest in the stock market.
Another feature of FA is the duration of investments, those who buy shares through this analysis, often hold them for many years. Warren Buffett himself chooses his stocks as if he was getting married to them. He does this with ease because he knows what he's doing, unlike those who despair of the petty daily rises and falls in the markets. That is, investors who use the AF, do consider their future in the long term.
So if you think that would prefer to look at companies and businesses rather than graphics, price and volume, fundamental analysis is more appropriate for your investing profile.
