investment strategies stock market
One of the most common myths about the stock market is the belief that the exchange trading it is necessary to devote all the time or not do it at all. Many people interested in the growth of its funds through investment in shares, stops the fact that they can not engage in stock trading every day, without paying attention to anything else. In this connection it is necessary to pay special attention to such an important topic as the strategy of exchange trade.
Choice of own investment strategies stock market for every investor begins with answers to three questions:
1. as far as I am inclined to take the risk?
2. how much time I am willing to devote to trading on the stock exchange?
3. for how long I'm going to invest their funds?
Risk appetite
Individual attitude to risk on the part of the investor is of great importance when choosing the investment strategy. Risk appetite is the personal characteristics of each person, and it is impossible to give a single answer to the question «good risk or bad»? For some people the opportunity to get a high income, risked all available means (and in some cases - and even to attract borrowed), is quite acceptable and justified, while others deem that such a strategy is totally unacceptable and would rather prefer a low but guaranteed level of income. Investment strategies of different types of investors will vary, however, before talking about the strategies, it is necessary to allocate and characterize different types of investors risk appetite.
Aggressive investor is ready to take the risk, to the maximum increase their capital. The opportunity to receive a higher income means to him much more than fears about the reliability of investments. The main objective of the investment for him - a significant increase of start-up capital.
Moderate investor usually receives investment decision on the basis of a thoughtful and comprehensive analysis of the market. He is ready to take on the risk, if the risk was justified, but most of all - adheres to the so-called «tactics of a partial investment, the diversification of its portfolio by risk level. Its aim is finding a reasonable balance between the preservation and augmentation of.
Conservative investor gives the reliability of great importance. He wants a smaller yield, if the risk of the decrease of the initial amount of investment will be minimal. The main objective of this investment strategy is to preserve what he has.
The trade
Each of us comes to the stock exchange with different purposes, and has a different time. Someone is going to make the exchange trade of their main occupation - and is ready to give her all of my time for someone to work with securities is a source of additional income, and most of the time he spends on the main job, with stock trading account only occasionally.
Contrary to the popular opinion that effectively working on the stock exchange you can only «from bell to bell», successful investor can become both the first and the second, if wisely choose and form its own strategy of exchange trade.
Investment duration of the
Coming to the stock market, everyone defines approximate term cash investments in securities in accordance with their own goals and opportunities. So who is planning during the year of a major purchase, someone already in his youth solves questions of pension savings. In addition to personal time horizons, the period of investment is closely connected with the chosen strategy, and more precisely with the time at which the open position.
At the time of retention of the position of operations can be divided into the following main types:
short-term;
medium-term;
the long-term.
The first category of operations the most popular among aggressive investors (speculators), which in turn are divided on the intraday traders, overnight-traders, swing traders, etc. The most bright representatives of the short-term trading are èòðàäåé-traders, who many transactions within one day working on a tranquil and leisurely traded securities, and to share with great rapidity, which are easy to buy and sell. In the end of the day intraday-the trader closes all of their position, because he does not assume the risk that the morning gap. As a rule, he works on its own and borrowed funds, as commits a transaction to be on the increase, and to decrease. It is quite natural that the stock exchange takes all of his spare time, and, most likely, is for him the main type of professional activity. In his work, he relies mainly on the technical and factor analysis, the analysis of the graphs he spends at the lowest possible intervals (teak, 1 minute, 5 minutes).
Short-term operations are held to a few days. The day volatility of the market trader virtually no interest, and most often the strategy of its work is in the daily morning analysis of the market situation, on the basis of which he chooses securities for transactions and defines the levels for the purchase or sale of a selected asset. As a rule, the investor enough to pay the exchange trade a couple of hours every day. He, as well as the Day-trader, is based first of all on technical and factor analysis, as the fundamental analysis of the impact on the more long intervals of time, however, when working analyzes more «long-term» graphic intervals, based on the hourly and daily data.
Medium-term operations are restricted to a few months. As a rule, for their opening covers not only the graphic models, but also the fundamental indicators of the company. Having made a decision and after the transaction, the medium-term investor in advance determines the price level for the closing of the position, and in the future periodically monitors the situation on the market, in order to keep abreast of and do not miss a favourable situation. Using technical analysis, he works with the daily and weekly charts, and tries to keep abreast of news and developments of relevance to the stock market and selected the Issuer.
Long-term investments require the investment of funds for several years. The basis for investment decisions is the fundamental analysis, which allows you to identify undervalued market for the company, and the investor expects to improve its indicators, and, as a result, increase of capitalization and growth of the shares. Having made a decision and after the transaction, the long-term investor only periodically monitors the market situation and prices of selected assets, without taking into daily “fever” market no participation.
If to carry out Parallels between the classification of investors on risk appetite and the duration of the retention of position, it becomes obvious that the aggressive investor, as a rule, will be inclined to short-term trading or trade within the day, a moderate investor chooses to make medium-term operations, and a conservative investor in most cases, it will invest for the long term, using a wide range of tools.
Naturally, all of this is true in the case, if the internal risk appetite among them coincides with the objective possibilities to dispose of their time at its discretion. Otherwise inclined to risk the investor may well turn into a long-term conservative just because opportunities to trade every day he does not have, and prospects, which opens before him the stock market, however, is very promising.
Do not, however, resist the obvious mistake about the fact that the more we commit the transaction - the more profit can be obtained. The income that each of us can make money by trading on the stock exchange, depends on how wisely we define the point of entry and exit from it, and not from the number of performed per unit of time of transactions.
In addition, it is clear that any strategy for the market can absorb all the free time, paid to the control of current positions and a search for promising stocks and the choice of the best moments for opening new positions, but short-term operations it will require us, of course. And on the contrary, short-term investment horizons, just forced to work only for a short term.
For example, if the investor does not have the free time and counts on long-term investments, and cash, which he invest, it will take him through half a year for the purchase of flats - to speak about long-term investing in this case is not worth it.
So, by taking the decision about the choice of investment strategy, we, first of all, find a reasonable balance between the three most important factors: our personal risk appetite, free time, which we have and the «degree of freedom» our savings.
