EQUITY TRADING: ART OR SCIENCE ?

Equity trading is not new phenomenon anymore instead it has gained momentum as more and more people are involved in this activity. In layman’s language equity trading is the buying and selling of company stock shares. It is also referred as financial leverage. Corporate and business houses use securities in the form of shares, debentures, bonds to enhance its earnings on common stock. Corporate may use of long term debt to purchase assets as assets have more capacity to earn in the long run as compared to the interest they receive on debts. This inflation of earnings reflects the successful strategy of the corporation and shows its accomplishment in trading on equity.

Equity trading normally takes place in pubic market. There is no time limit on trading of equity and it can be traded any time of day or night. Online trading is the boon for all those who have computer knowledge and has the capacity to invest in the market. It is method of investing in securities and other stocks through Internet based stock brokerage service. Here the user trades on securities using web based interface thus eliminating the actual stock broker. This is the cheaper mode of trading as the commission of the broker is knocked out.

Equity trading is not everyone’s cup of tea. It requires foresight, perseverance, ability to withstand loss, good mathematical ability and adequate knowledge about the market moves. In this sense equity trading is blend of both – art and science. One has to make Fundamental Analysis – the Art side and the Technical Analysis – the Science side before trading on equity.

Stock market is not to gamble the prices or beat around the bush. Thorough research has to be done to excel in it and earn a profitable return and this call for Fundamental Analysis. The foremost aspect is that one has to consider the potential profit sources which render profits to the person indulged in equity trading. One has to carry out bottom up analysis and top down approach which involves detailed study of financial statements of the business, its management study, information of market share, its competitors’ strength etc. This is done with the guidance and help from historical and present data and it includes within its purview Economic analysis, Industry analysis and the Company analysis.

Technical analysis is the security analysis method of forecasting the direction of prices through historical data of market mainly concentrating on price and volume. This analysis assumes that prices are random and when one cautiously tracks these movements, the future prices can be easily judged by studying past trends which in turn helps the investors in making investment decisions.  This analysis helps in determining the expected moments of stock prices.

Both fundamental analysis and technical analysis are pillars on the basis of which the strength of your investment rests. Fundamental analysis will suffice in dealing with small firms, companies but when you are going to deal with big corporate then technical analysis is the desirable option that one should go for.

Sponsor Ads

• Ad Space Available - Rent it Now!

Report this Page

Created on Dec 31st 1969 18:00. Viewed 0 times.

Share on APSense

Comments