InvestorQ : If not predicting markets, what should I as a trader focus on?
Diya Chitale made post

If not predicting markets, what should I as a trader focus on?

3 years ago

Whether you are a trader or an investor, don’t obsess yourself with the market levels and market direction. As an investor, your focus should be on identifying good stocks and the fundamental tipping points. As a trader, your job is to read the signals of the market and not to focus too much on predicting highs and lows.

Forget about Nifty levels and stock levels. Focus on value if you are an investor. If the stock has value then you can always get returns on the stock by entering at the price. Investing is all about the trade-off between price and value.

Focus on the point of exit a lot. That is where you make a profit. It is hard to know whether the stock or index you are exiting will go up further or not. Focus on whether you have got returns commensurate with your risk. Also ensure that the benefit of exiting is more than the benefit of holding.

Use shot term chart indicators to fine tune your entry and exit in the markets. When you are a trader, buying 5% lower or selling 5% higher can make a big difference to your overall performance. That is where you can use technicals to fine tune your levels. Why waste time trying to predicting how the market will move.

The best of minds, including Warren Buffett will tell you that the one factor you do not have any control over is the market returns. That is an outcome. You must focus more on ensure that all the inputs are in place.

Why digress from core investment and trading role which is about managing money. You manage money in two ways. As an investor you identify good buying opportunities. As a trader, you manage risk and trade smartly. Predicting market levels is really not relevant in any of these places.