To succeed in the financial markets, it is imperative to learn, understand, practice and master the art of trading and investment. Doing so would allow one to execute their trade successfully with minimum losses. As per Kavan Choksi, trading approach to follow for every market instrument is unique. Moreover, most experienced traders have their own approaches, timescales and may trade across various markets. They usually have a methodology for analyzing markets that work for them.
Kavan Choksi shares a few beginner tips for trading in the financial markets
A robust understanding of the financial markets one is going to trade in is extremely important to make well-informed trading decisions. Regardless of the financial instruments one chooses for their trading journey, commodities, indices, forex or something else, there are a few important elements that all day traders should focus on, like market terminology, unique traits of the market, as well as factors influencing price movements. In forex, for instance, price movements are measured in pips. On the other hand, they are measured in ticks or points in other markets. Knowing unique traits and terminologies associated with every market is a necessity for all newbie traders.
Factors that influence price movements in each market also tend to differ. For example, Forex is largely influenced by economic reports from the countries of the traded currency pairs. Conversely, prices of commodities majorly rely on demand and supply. Therefore, forex will move in large swings when economic reports are released, particularly reports from Japan, the Eurozone and the United States. Commodities essentially see a lot of movement subsequent to the announcements of shortages in supply. In order to effectively identify trading opportunities presented by these events, one would require a proper understanding of what exactly influences each market.
Newbie traders need to learn how to properly evaluate market conditions, or identify trading signals that present trading opportunities. To do so, one has to carefully analyse the market. There are two major methods of doing so, fundamental and technical analysis. The prime difference between the two is the type of data used for predicting future market movements. As Kavan Choksi mentions, while fundamental analysis involves studying financial and economic factors that may impact the markets down the line, technical analysis is largely based on the past price movements of an instrument. Analyzing financial markets might seem complicated at the start, but one would gain a better understanding of how financial markets work with time.
People just starting out with day trading should ideally focus on news trading, identifying support and resistance levels, and acquiring an understanding of basic chart patterns. After getting a certain degree of experience in the market, one would be able to find trading signals in complex economic reports and technical indicators.
Entry point in trading implies to the price level one would be willing to open a trade at. When carrying out the market analysis, one may see that the markets are primed for trading at times, while in other situations it might be better to stand aside. If the identified trading signal is strong, one may open a trade right away. However, if one is not sure of the current market conditions or has information providing conflicting signals, it can be better to hold on and wait for a trade with a stronger signal.
