A three-pronged approach to trade analysis

It enables an investor to prepare for the share market in advance and purchase stocks which can prove profitable when sold in the future.

Mar 31, 2018 07:03 IST India Infoline News Service

Trade analysis is one of the most important tools used by successful investors to pick stocks and make intelligent investment decisions. It enables an investor to prepare for the share market in advance and purchase stocks which can prove profitable when sold in the future.
 
Typically, stock trade analyses include three phases which have to be followed to implement the process successfully:
 
Pre-Trading: Research 
Pre-trade analysis includes preparing for the trade beforehand. It includes, on the investor’s part, research on the investment and the company’s background. For an investor to successfully analyze pre-game trade, he would need to read different financial newsletters, screeners, watch news related to the share market, and hire stock-picking services and a brokerage firm for advising him/her on future investment decisions.
 
Once you have figured out what stocks you are interested in and which company you want to invest your money in, the pre-game trade analysis is officially over, and you can move on to the next phase of trade.
 
Live trading: - Buying stocks, monitoring investments, and selling purchased stocks
In this phase of trading, the analysis includes real-time market quotes, establishing stop-loss orders, limiting orders, and performing trade analysis.
 
This phase also includes buying stocks after the pre-game analysis, monitoring them on a regular basis to know when the price is higher or if the price is falling, and making a sell order based on the current market price of the investment.
 
Post-trading: Reviewing the trade
Post-trade analysis starts after an investor has sold the stocks he/she had bought at the second stage. It requires an investor to review the trade to find out what went wrong or what was done right during the trade. It allows the investor to find faults in the current strategy he/she is using and make better investment strategies in the future.
 
Reviewing your trades is one the most vital parts of a successful investing career. This phase gives investors the room to include the aspects of the previous trades which were successful or avoid committing the same mistakes again.
 
How to successfully implement post-trade phase of analysis?

Follow these three points to successfully implement the reviewing phase of trade analysis.

Save the trade details: Make an excel sheet of all of your investments with the date of purchase. Write down the respective ticker symbol, the amount invested, the number of shares bought, return percentage, as well as return amount against each investment.
 
Download the stock chart: Download the stock chart of all of your investments and mark the chart with buy and sell points alongside different trend lines, support or resistance levels, etc. After this, mark the chart with the trade information and save it to your computer. 
 
Write your review: Analyze your trades using the above information and write what you did right and what you did wrong on an excel sheet, word document, or a piece of paper and read it every time before you make a trade in the future.
 
Always go through with the three stages every time you make a deal in the share market as they are what makes an investor successful in this highly volatile and risky market.

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