The Basics Of Stock Market

Lesson -> How to get Started?

Now that you have read and understood the 12 chapters of our first module, it is time to move on to the next."The Basics Of Stock Market"  You are now ready to dig deeper!

This module will give you an overview of stock markets. We have selected the concepts that you will need to be familiar with in order to help you understand the stock market. It is a sign that you still have questions. As we move on to the next module, you will find your answers.

This stage will help you understand the differences between learning modules and how they are related. To give you an idea of what modules Stock Market Box will cover, here are some examples.

  1. Introduction to Stock Markets
  2. Technical Analysis
  3. Fundamental Analysis
  4. Futures Trading
  5. Option Theory
  6. Options Strategies
  7. Quantitative Concepts
  8. Commodity Markets
  9. Risk Management & Trading Philosophy
  10. Trading Strategies & Systems
  11. Financial modeling for investment practice

13.1 - There are so many modules, how do they all interconnect?

Stock Market Box is an educational resource that provides high-quality market information. This content will include fundamental analysis, technical analysis, and derivatives. It will also cover risk management, financial modeling, financial modeling, risk management, and other topics. Each topic is classified as a module. You might be wondering how these topics fit into the overall scheme of things if you're new to the market.

Let me ask you a few questions to help you gain perspective.

What is the most important thing you believe is essential to market success? Market success is easy to define - if money is made consistently, you're successful. If you don’t make it consistently, you're not.

If you had to answer the question for me, you would probably think about risk management and discipline, market timing, information access, and other things. Market success is dependent on your ability to manage risk.

These factors are important, but it is not enough. What is more important and fundamental in the development of a Point of view (POV)

Point of view refers to the ability to develop a sense or direction about a stock or market in general. Your POV would be bullish if the stock goes up. You would then buy the stock. You would also be a stock seller if you believe a stock will fall.

How do you develop a point-of-view? How can you determine if the stock will go up or down?

A systematic approach to market analysis is essential to developing a point-of-view. There are a few ways you can determine/ analyze what to sell or buy. These are:

  1. Fundamental Analysis (FA)
  2. Technical Analysis (TA).
  3. Quantitative Analysis (QA).
  4. Outside views

Here is an example of how a trader thinks while developing a POV (whether or not to buy or sell stocks). This illustration was created using a particular analysis method.

POV based on FA- The quarterly numbers are impressive. The company reported a 25% top-line and 15% bottom-line increase. The company's guidance is also positive. The stock looks bullish because of all the fundamental factors. Therefore, it is a good stock to buy.

POV-based on TA The MACD indicator is bullish, along with a bullish engulfing pattern of candlesticks. This study shows that the stock's short-term sentiment looks positive. Therefore, stocks are a good buy.

POV-based QAThe stock's PE (price to earnings) has risen by 35% in the wake of the recent move.rd standard deviation. The PE has a 1 percent chance of breaking the 3rd standard deviation. It is reasonable to expect a return to the mean. Therefore, the stock is a sale.

Outside view -An analyst on TV recommended a buy of the stock. The stock should therefore be considered a purchase.

Your POV should be based on your analysis and not an outsider's. Often, one regrets taking action based upon an outside view.

What should one do after creating a POV? Is it possible to trade this point of view right away? This is where markets get complex.

If your POV is bullish you have the option to choose one of these:

  1. You can buy the stock on the spot market.
  2. You can buy the stock on the derivatives markets.
    1. You can buy futures with derivatives.
    2. You can also trade through the options market.
      1. There are two types of options in the options market: call options and puts options.
      2. To create a synthetic bullish trading strategy, you can combine call and put options.

What you do with your POV after it is developed is completely different. Profitable trading requires that you choose the right instrument for your POV.

If I am extremely bullish on the stock in the short term (say 1 week), I would prefer to trade a delivery trade. If I am outright bullish on the stock for a short time (say, 1 week), then I would prefer to trade a futures instrument.

It would be prudent to select an option instrument if I am bullish but have some restrictions (example: I expect the markets to bounce due to a great budget announcement but don't want too much to risk),

 Market participants need to have a point of view and select the right trading instruments. 

You should also have a better understanding of the role that each module in "Stock Market Box", plays in the market's integration.

Keep this in mind as you continue to explore the content Stock Market Box.

These modules will cover concepts that can be used to develop POV on the basis of Technical and Fundamental Analysis.

These modules will give you a good idea of how to develop a market perspective. We will then discuss which trading instruments can be used to complement your viewpoint. We will increase the flow as we go along to assist you in calibrating your trades using effective risk management techniques.