The financial market is one of the largest industries in the world. Sectors such as banks, insurance, pension firms, and money managers control trillions of dollars. Specifically, money management firms such as hedge funds, mutual funds, and index funds are responsible for investing their clients’ funds. Each of these sectors use different strategies to grow their assets under management. Examples of these strategies are long short strategies, activist investing, value investing, and quant traders among others.
The same is true for small-scale traders. There are so many ways of categorizing them based on their strategies. For instance, you can categorize them based on what they trade. In this, there are currency, commodities, and equities traders. There are also those who combine all ‘asset classes’. In terms of their method of analysis, there are some who base their trades on instincts, fundamental analysis, or technical analysis. Others combine the three. In terms of the style of trading, there are some who prefer day trading while others prefer swing trading.
It is possible to make a fortune in any of these strategies. A good example is to compare Warren Buffet and James Simmons who use very diverse trading strategies. While Warren buys large companies, and holds them for years, James is a mathematician who focuses on algorithmic trading. In algorithmic trading, one can open thousands of trades every day.
The in trading is identifying your weaknesses and exploiting your strengths. If you believe that day trading is not for you, you should focus on other long-term investing. That’s where you will make your money. You should take time to identify the method of analysis that you are great at. You might be poor at analyzing economic data but perfect at using technical analysis. Use your strength to become a better trader.
The financial market is very dynamic such that no day is ever the same. You will learn new things every day. It is therefore important to be flexible on your strategies. Learn to change your strategies to adapt to the changing trading environment. A good example is what is happening in the high frequency trades where algorithms are controlling the market. You should try to find new opportunities in the new areas.
There are many sources of ideas which you can use to improve your trading. First, you need to use books and other written materials. Many books have been written by authors who introduce new concepts. Others write about their successes and failures in trading. For example, Kathy Lien wrote a book called Millionaire Traders: How every day traders are beating Wall Street. In the book, she interviewed 12 ordinary traders who shared their trading strategies. Reading such books will open your mind to new ideas which you can use to boost your trading.
Television is another common of trading ideas. Financial TV stations like Bloomberg and CNBC interview traders and investors every day. These people share their trading styles and insights which you can apply. However, you should always think about their ideas and make an independent decision. People have lost their fortune by implementing strategies.
Finally, you can use your personal efforts to come up with trading ideas. This involves taking time experimenting new ideas and testing them for their accuracy. The benefit of doing this is that you will find an idea that suits your trading needs or lifestyle.
After finding new ideas, you should never use them without studying them carefully. You should take time to study and test them for an extended period of time. Doing this will help you know whether the ideas are realistic or not. If they are accurate, then you can go ahead and use them with your real funds.