Stock market offers different kinds of investment options; most of the direct investments can be done in the following way:
Analysing the fundamentals: This is also known as value picking. It is one the earliest methods of investing in the stock market. Here, you analyse the stock based on various factors like dividends, cash flows, market capitalisation, expected growth, PE ratio, management capabilities and various others. All these factors can prove to be reliable sometimes and sometimes they can change drastically. After investing the capital major changes in the parameters can hurt capital.
Investment in this method is done for a longer term and therefore it is vulnerable to long term fluctuations, external factors and government policies.
This method helps in creating long term wealth; however, there are no monthly profits. Once invested the amount needs to be invested for a good amount of time to realise the profits. There are various option trading courses in India that help you gain in-depth knowledge of options.
Investment by analysing the technical charts of a stock: This method of investment can be extreme to analysing the fundamentals. Here the investor captures the price movement of a stock to materialise profits. Money is made based on the movement of the stock. Both buy and sell positions are made on the basis of the chart analysis of a particular stock.
There are various studies that you can filter your stock with and estimate the further price movement. The duration of the trade can last anywhere between 30 minutes to 2 –5 years. One thing which is absolutely sure in trading is that nothing is certain and the stock or the market can behave in any direction anytime. These studies can help you understand and estimate the course of a stock but they cannot guarantee anything. A stock may move or may not according to your analysis.
Hedging options: Another style of trading worth considering is trading through hedged option strategies. This style of trading of trading is not normal but non- directional strategies in nature. Non-directional simply means that you are not trying to foretell the direction of the market. You are making positions in such a way that where the market moves you will still generate market. So, in this way you get consistent returns in falling markets, bullish market and even sideways market.
The benefits of this style of trading are:
- Consistent returns can be generated in almost all types of market.
- It does not require high subject knowledge like technical analysis.
- You don’t even need to wait for years like fundamental style of trading for making profits.
With a bit of knowledge about options trading strategies & trading, you can make a good amount of returns on a consistent basis. Trading can take some years to get acceptance as a full time occupation.
If you talk to your elders you would suggest you to stay away from the stock market. If you ask them they would have never even heard of strategies like options and other derivative instruments. Time has changed and new techniques have come up. You should always analyse the cost benefit of all your decisions very carefully.