Successful Stock Trading

In an uncertain world, successful stock trading may be decidedly more profitable that successful long term investing. In persistently volatile markets there is profit to be made when stocks rise and when stocks fall in price. Although choosing, buying, and holding the right stock can be profitable over the years the long term investor misses out on potential profits as even the most stable of stocks varies in price. How to become a successful stock trader requires the same knowledge of stock fundamentals that makes an investor successful. Additionally successful stock trading requires a means of assessing or analyzing variations in market sentiment. Stock prices rise and fall with the news and with changes in market psychology. By staying tuned in to the technical side of the market traders can often anticipate market swings and profit with techniques such as short selling or options trading.

Technical analysis of stocks, market sectors, or the market in general works on the principle that the fundamentals are discounted as soon as they are known. To the degree that a trader or investor has unique insights into a given stock they may be able to anticipate changes in fundamentals and profit accordingly. A more profitable situation is when that same trader or investor has the ability to anticipate fundamental changes in a stock and predict market reaction as well. The most successful stock trading is not based on either fundamental analysis to the exclusion of technical analysis or vice versa. The most successful stock trading is based on a broad knowledge of fundamentals and timely analysis of stock price movement.

An example of the need for both types of analysis in successful stock trading is in trading Toyota. Some time back traders were concerned about market reaction to Toyota stock in light of problems with a computerized brake system. The company did not handle the problem efficiently and the stock suffered. Now, in what seems like a different world, trading Toyota or any Japanese stock must take into account the recent devastating earthquake and tsunami which devastated the Northeast coast of the main island. Although the damage itself was not in a heavily industrialized area several nuclear power plants sustained damage and are not producing power.

In post tsunami stock trading the fact that Tokyo Electric Power Company supplies electricity to half of Japan?s industrial base is crucial. Successful stock trading of Japanese stocks today is not so interested in old issues like computerized brakes but rather whether Japanese industry will be able to produce and export or if rolling blackouts will hamper production in the coming months or years. How to make money trading stocks in Japan in coming months will require both a deeper than usual knowledge of the facts in Japan and accurate technical analysis of price patterns. A smart long term investor will look to pick up bargains on hard hit Japanese stocks. However, the smart trader will look to profit whether a Japanese stock recovers or falls further in price.