Use Better Stock Market Analysis to Increase Hit Rate
Posted on September 29, 2010
When to do Stock Market Analysis!
Almost every day I run into to traders who show up for trading unprepared and don't realise the importance of stock market analysis. They are anxious to trade as soon as the market opens but they are too lazy to do the homework prior to trading. It is important to analyze the market or stock prior to entering a trade. The trader might see a buy signal but fail to see the big picture. It might be a valid buy signal but it occurs in an overall downtrend or at resistance making the trade a low odds trade.
When I mention this issue to the traders in question, they all seem to understand my point of view so the next time I see they tell me how proud they are of themselves for doing their stock market analysis for the current stock. Imagine their shock when I tell them that they are only halfway as they are missing a vital part of the preparation. It is not only about doing stock market analysis but also about when to do it.
When I first started trading I noticed that my mentor was always so well prepared in every trade. When a signal was triggered he was already aware of it prior to the alert as well as the support/resistance and this was because he had analyzed the stocks prior the market opening. He did not analyze the stock between the signal and pulling the trigger. I asked him if it wasn't too difficult to keep that amount of information in the head and he said that he believed that the stress associated with analyzing the stock in between signal and entering the trade had a huge negative impact on his trade. Furthermore he believed that if you analyze the stock prior to the signal you are much more objective about the stock and thereby more willing to discard the lower odds trades.
Many traders get excited about the signal which can impact on their stock market analysis as they ignore the warning signs as they just want to hurry up and enter the trade. Don't fall into this trap-always take time and effort to undertake full stock market analysis before trading.
When I mention this issue to the traders in question, they all seem to understand my point of view so the next time I see they tell me how proud they are of themselves for doing their stock market analysis for the current stock. Imagine their shock when I tell them that they are only halfway as they are missing a vital part of the preparation. It is not only about doing stock market analysis but also about when to do it.
When I first started trading I noticed that my mentor was always so well prepared in every trade. When a signal was triggered he was already aware of it prior to the alert as well as the support/resistance and this was because he had analyzed the stocks prior the market opening. He did not analyze the stock between the signal and pulling the trigger. I asked him if it wasn't too difficult to keep that amount of information in the head and he said that he believed that the stress associated with analyzing the stock in between signal and entering the trade had a huge negative impact on his trade. Furthermore he believed that if you analyze the stock prior to the signal you are much more objective about the stock and thereby more willing to discard the lower odds trades.
Many traders get excited about the signal which can impact on their stock market analysis as they ignore the warning signs as they just want to hurry up and enter the trade. Don't fall into this trap-always take time and effort to undertake full stock market analysis before trading.