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03/21/2023

Stock trading -Technical vs. fundamental analysis





Stock trading basics: what is stock, what is a stock price, and how to find a stock

Day trading: This strategy involves buying and selling stocks on the same trading day with the goal of capturing small price movements and profiting from short-term fluctuations. Day traders typically use technical analysis and a high level of market surveillance.

Day trading is the activity of buying and selling financial instruments such as stocks, bonds, futures or commodities in order to profit from price changes within a single trading day. Multiple positions are held throughout the trading day from seconds to hours; they are always closed at the end to avoid danger. Buying and selling are carried out during trading hours. Anyone can day trade, but it takes time and effort to monitor positions and technical indicators to decide when to exit the market. A day trader keeps costs to a minimum as he opens multiple positions in the market. This is one of the main reasons for holding positions overnight, as they do not incur overnight funding charges.

Stock trading terminology: stock ticker symbol, volume, and open, high, low, and close prices

Level II quotes are an important tool for day trading stocks. Essentially, Level II is the order book for Nasdaq stocks. It goes beyond showing the current bid and offer by also displaying the bids and offers at other prices. In this way it provides what is referred to as ‘market depth’.

One should select those stocks that are relatively stronger than the sector or the index for swing trading. This measure helps us identify both the strongest and the weakest securities or any asset classes within the financial market. Usually, the stocks which display strong or weak RS over a given period tend to continue going forward.

Fundamental analysis: analyzing a company's financial statements to decide whether it is worth investing in

A stock market analyst will run an analysis of a company’s financial statements to review a number of different facets. These facets include things like overall profitability, liquidity, efficiency, the potential for growth and leverage. The stock analyst will use several different ratios to his/her advantage to give them more insight into the overall health of the company. For example, the current ratio analyzes whether or not the company will be over to cover its debts with the current assets that it has. This will naturally give you insight into how well the company is likely to do further down the line in light of their debt to asset ratio.

Essentially, fundamental stock analysis takes into account financial statements of previous years and compares them to the current financial statements. In doing so, you can better understand whether or not a company is in the process of sustained growth or if it is on a downward trajectory. These observations are of course not a final damnation or a concrete approval but they do help the analyst to better understand what could unfold in the coming months and years. An analyst may even compare these financial statement records to that of another company in the same sector to better understand the lay of the land.

Day trading v/s swing trading

Day trading involves buying and selling assets over a short period of time, such as seconds or minutes. For example, if the market price of a stock changes, traders will take a trade if they can profit from it. In day trading, all positions (buy or sell) are opened and closed on the same day.

The two most common forms of trading are day trading and swing trading. Day traders buy and sell securities on the same trading day; positions are never held overnight. Swing traders, on the other hand, buy assets that they expect to appreciate in value within days or weeks.


By Roger K. Olsson



#stocks #shareholders #stockexchange #investing #daytrading #fundamentalindexing #financial #statement #day

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