Novice traders are often overwhelmed and intimidated by the algo free trading landscape, not sure how to start or how to improve overall strategy and performance. Navigating the varied strategies available, such as Fundamental Analysis and Technical analysis, can assist novice traders to achieve better results by utilizing the right approach for their individual needs and goals.
Fundamental Analysis, while seemingly complex and analytical, is actually a fairly straightforward strategy focused primarily on the underlying economics of a stock rather than an in-depth technical examination. By first looking at the company’s financials, such as past earnings and current performance, the trader can evaluate if and how much the stock is worth. Additionally, it is important to check the overall macroeconomic environment and to consider the political climate in determining whether to buy, sell, or hold a stock. Fundamental analysis requires some in-depth research and understanding of financial statements, such as balance sheets, income statements and cash flow statements, so this can be a daunting task for novices.
Technical analysis involves less research, but is more complex in that it focuses on the stock’s price performance and movement over time. It involves no financial metrics or calculations, but rather the pattern recognition and interpretation of the stock’s behavior and any cyclical patterns, trends and signals. Technical analysis requires no understanding of the underlying financial statements, but does require sharp observation skills and an understanding of indicators such as the Moving Average Convergence Divergence (MACD), relative strength index (RSI), on-balance volume (OBV) and the moving average. While potentially less in-depth, technical analysis still requires knowledge of these indicators and an understanding of how they work together and what they indicate.
Both fundamental and technical analyses offer advantages and disadvantages and a novice trader needs to decide which strategy is right for them. While fundamental analysis is often seen as more accurate and reliable owing to its in-depth approach, it is also a more complex process that can be daunting to a novice trader. Technical analysis, on the other hand, is generally quicker and simpler to understand, though its signals can be less reliable and require a good understanding of accompanying indicators.
Regardless of which approach the novice trader chooses, there are some general guidelines that should be followed in order to make the most of algo free trading and improve overall performance. Firstly, research should be conducted to gain a basic understanding of financial statements, trading lingo and current market trends. Secondly, it is important to have a thorough understanding and knowledge of the chosen trading strategy and its indicators. Thirdly, learning from experienced and successful traders is a great way to increase understanding and gain insight into their strategies. Fourthly, it is essential to remain patient, disciplined and not get greedy in order to avoid costly mistakes and losses. Lastly, tracking performance and regularly revising and updating strategies can prevent losses and help improve returns.
Utilizing the right approach and following these guidelines can assist the novice trader in building their confidence and success in the algo free trading landscape. With the right attitude and dedication, novice traders can improve their overall strategy and performance and achieve the desired results.