Trading is an interesting concept.
Unlike investing, trading is a short term process that's designed to maximize the amount of money that you can earn in the market on any given day.
However, because of the short-term nature associated with trading, there's also added risks involved, leading to failure for many.
Nonetheless, you don't have to be among those that lose their money while trading.
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In fact, by making the right moves, you may find that trading is an incredibly lucrative process. Today, we'll talk about a key strategy that will help you to succeed in the world of trading and how to employ that strategy to generate solid profits.
Today, we'll talk about a key strategy that will help you to succeed in the world of trading and how to employ that strategy to generate solid profits.
Understanding Fundamental And Technical Analysis
Before we get into the strategy that will help you to succeed in the world of trading, it's important that you understand what fundamental and technical analysis is. Both of these types of analysis are designed to get an idea of what's likely to happen in the market. However, they are both very different from each other. Here's how they work...
Fundamental analysis is the process of analyzing fundamental factors to get an idea of what's likely to happen next. This includes everything from the ability of the CEO of a company, to soon-to-come press releases, product releases and much, much more. Instead of depending on charts and numbers, the fundamental analyst focuses on newsworthy data surrounding an asset to get an idea of where that asset is headed.
Technical analysis is the process of analyzing technical factors to get an idea of what's likely to happen next. The technical analyst pays close attention to charts, looking for signals that something is likely to happen soon. Some signals include flags on a chart, trend lines, support, resistance and more.
The most successful traders tend to mix these two types of analysis. In my opinion, this was best explained by David Becker, a senior analyst at Trade-24. Here's what he suggest:
“Market analysis is the key to a successful trading strategy. By properly analyzing market conditions, both on a technical and fundamental level, traders become psychics in some respect. While it's impossible to clearly see into the future, solid fundamental and technical analysis offers a window into what's likely to happen moving forward.”
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Trend Trading With the News Is a Great Way to Come Out Ahead
Now that you have an understanding for fundamental analysis as well as technical analysis, I'd like to introduce you to a strategy that encompasses them both and has led to profits time and time again for me. The strategy is called trend trading with the news. Ultimately, the goal here is to find trending assets by following upcoming news events, and take advantage of the trends by trading based on technical factors following the events. Here's how it works...
What You Will Need
First, in order to find the upcoming news events, you will need an economic calendar. The economic calendar I use is a free one from Bloomberg. Nonetheless, any economic calendar will work. Economic calendars are like any other calendar. The difference is that these calendars are designed to let you know what events are coming up that are likely to cause movement in the market.
You will also need a candlestick chart. While any chart could work, candlestick charts make spotting trends a simple process.
Steps To Trend Trading With The News
- Use Your Economic Calendar To Find The News – The first thing you'll need to do to employ this strategy is find upcoming news events. To do so, open your economic calendar and look for news surrounding a financial asset that you're interested in. It's a good idea to look for larger events like earnings reports, product releases and corporate announcements.
- Make A List – Now that you have your economic calendar out, make a list of the news events that are of interest to you. On your list, make sure to include the date, time and the asset the event is associated with.
- Make Yourself Available – Ultimately, you're going to have a hard time taking advantage of the trends if you're busy when the trends happen. So, make sure that you schedule yourself to be available 15 minutes before the start of the event and for a minimum of an hour following the event.
- Get Prepared – On the day of the event 15 minutes before the event starts, search for websites that let you know what's happening with regard to the news event. Also, open your candlestick chart for the asset that you're planning on trading and set it to the 5 minute frame.
- Wait For The Event To Happen – One of the biggest mistakes that traders make when trend trading with the news is making their trades before the event actually happens. This leaves too much by way of uncertainty and often leads to losses. So, wait not only until the event happens, but for a period of 5 minutes after the event. Shortly following an event, we will see roller coaster like movement in an asset. You want to wait until the volatility dies down and you have a clear picture of where the trend is headed before you start making trades.
- Analyze And Act On Trends – After 5 minutes, a clear trend should become apparent. From here, determine the direction of the trend and make trades based on that direction.
- Collect Your Profits – That's it! If done properly, you're going to see profits from this strategy!
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While trading can come with high risk, when taking advantage of solid strategies like trend trading with the news, you will see that it's not hard to come out ahead. So, what are you waiting for? Start searching for upcoming trends that you can take advantage of!