Hello friends today we are going to gain knowledge about how we can Study Stock Market or Share Market. So Let’s Begin,
As we have covered previously What is Stock Market? or What is the Share Market?
Let us quickly revise and then move on to How to Study it?
What is the Stock Market? or What is the Share Market?
Basically the section of Stock Market / Share Market comes under the broad classification of Financial Market.
The Financial Market is divided into two different types of markets which are, Capital Market and Money Market.
Under the Capital Market there’s another Sub-Division of two types of Markets, which are Divided into Primary Market and Secondary Market.
Now in this Subdivision Stock Market falls under the classification of Secondary Market, where we can say that Secondary Market is another name for Stock Market.
If you have directly come to this post, then the question in your mind would be, How does a particular Company get listed on Stock Market?. Well the answer is, Initially the Company files an Initial Public Offering (IPO) with the Regulator, which in Case of Indian Companies regulator is Security Exchange Board of India (SEBI) and then a particular Date of Bidding & Listing on Stock Exchange is decided.
After Date of Listing is announced, on that particular date Stock is listed on Secondary Market i.e Stock Market. Stock Market is a place where Shares of Various Different Companies are traded in which some people make profit and some make losses.
So, Next question in your mind would be How one can make Profits out of the Stock Market? or Share Market?
Well Simple answer for this is, Just Buy at Low and Sell at High, Right?
The Main hurdle for this is that, How we would come to know When to Buy? & When to Sell?
The answer for this is we need to study Markets very deeply. There are various types of analysis done on Global Economy, Particular Country’s Economy, Stock Market Indices of Various Countries and Major Big Companies of particular countries. In case of India it could be Reliance Industries, ITC. There are Two of Studies in Stock Market which are normally followed, which are:
1) Fundamental Analysis
2) Technical Analysis
Now let us discuss these two types of study in depth and try to gain some knowledge out of it.
1) Fundamental Analysis:
All analysts try to determine whether a security is correctly valued within the broader market.
Analysts typically study, in order, the overall state of the economy and then the strength of the specific industry before concentrating on individual company performance to arrive at a fair market value for the stock.
Fundamental analysis uses public data (Balance Sheet, Surveys and Forecasting Methods) to evaluate the value of a stock or any other type of security.
For Stocks/Shares which are to be analysed, fundamental analysis uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company’s underlying value and potential for future growth. All of this data is available in a company’s financial statements
Well this was a basic overview of Fundamental Analysis, Now Let’s move on to Technical Analysis.
2) Technical Analysis:
Technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. These days with Prices and Volume many other aspects which are to be considered for our trading decisions.
Our Trading decisions depend on below Factors:
- Type of Stock (Up Trending / Down Trending)
- Price Action.
- Chart Patterns.
- Indicators.
- Money Management.
- News, if any is expected (For Example: Earning Report/Dividend Decisions).
We make a decision to Buy/Sell after there is a confluence of all above factors pointing in the same direction, so that it helps us to make a Concrete Decision with well managed fund action to make our decisions profitable.
So which is the best type of Analysis? Fundamental Analysis or Technical Analysis?
If you ask me, then surely the answer is Technical Analysis. Now you may ask Why Technical Analysis Right?
Let’s have a Point-wise view on this. From now on Fundamental Analysis would be called FA and Technical Analysis would be called as TA
- Time Frame for FA would be Quarterly to Yearly because Company’s Results are declared Quarterly and Yearly whereas TA can be studied on any time frame Right from Yearly to 1 Minute which includes (Monthly, Weekly, Daily, Hourly, Etc)
- Trading Decisions in FA is completely dependent on Quarterly Results, whereas after Studying TA on charts we all see a Clear view of what sentiments (Bullish or Bearish / Positive or Negative) are going on in a particular Stock/Index and we can decide our Trading decision based upon the same and Execute our trade anytime.
- Age / Qualification: For FA we do require some Basic knowledge of Financial Accounting for the same we should have Good Qualification, if a person is young still he can manage to get into new things, but for someone who is bit old and have responsibilities he/she might face difficulties in learning FA and if that person is not having Commerce background then it becomes very difficult for him/her to Study FA. While TA can be learnt by anyone, seriously speaking ANYONE CAN LEARN TA, because it (i) Does not require Qualification, (ii) Age is just a number for TA, because it’s that very easy, right from 15 year old to 70 year old can learn TA, considering that he/she should be able to operate computer.
Conclusion:
Technical Analysis holds an upper hand in comparison with Fundamental analysis. But yes there is one major Advantage if a person have skills to Analyse Balance Sheets, then he/she might have to do some sectoral analysis and can find a Multibagger Stock, By finding an Undervalued Stock, but finding an undervalued stock takes time and cannot be found in a day, it requires study of company’s 6-7 Quarters Balance sheet. Whereas concentrating the same amount of time in Technical analysis could give you superb returns say around 7-8% per month. Yes right 7-8% per month which could easily turn your Capital Invested approximately 2 Times in a Year.
Now your one question in your mind would be, Do we need to Study Fundamental analysis and Technical Analysis both?
In my opinion, the answer would be, No. It’s not necessary to study both, Only Technical Analysis would be enough for you Trading Decisions, because ultimately PRICE and VOLUME would easily define the sentiments of Stock/Index and can see what are Big players like Foreign Institutional Investors (FII), Direct Institutional Investors (DII) (DII ares, Banks, companies, Mutual fund Companies, etc) and High Net Worth Individuals (Rakesh Jhunjhunwala, Radhakishan Damani, Vijay Kedia,etc) are doing.
Hence alone Technical Analysis can be helpful for studying Stock Market, in which you can also apply this Study to other Charts like Commodities, Currencies, Foreign Countries Indices or Companies. So we can say that this is an ALL IN ONE PACKAGE which would help us to generate a passive income stream.
Well, that’s all for today, hope you like my article. If yes then do Like Share and Comment.
Further we would be Studying Each Factor in detail, so that it would help us to take correct Trading Decision,
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If you have directly landed on this page do check out my other informative sections of blog below:
- Basics of Stock Market
- Stock Picks of the Week
- Watchlist of the Week
- Stocks
- Indices
- Currencies
- Commodities
Note:
Stop Loss should be on closing basis. For Example after Buying Whirlpool for 2140 and at end of the Day/Week/Month based on Chart Time Frame, if it is Closes Below 2091 then you can confirm that our Stop Loss has been triggered.
PLEASE FOLLOW STOP LOSS STRICTLY TO PRESERVE YOUR CAPITAL
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