If you were anything like me when I started out, you are confused about what to look for in a good stock trading education. This article will highlight what you need to know.
How to Choose the Perfect Stock Market Course?
Choosing the right stock market course is an important decision. There are many providers of stock market courses; some are free, and some can be very expensive.
Understanding what you will be getting is very critical so that you do not part with your hard-earned money and realize that what you purchased does not meet your needs.
What Should A Good Stock Market Course Cover?
When looking for stock market courses, you need to make sure that the training:
- Is designed to meet your needs – Day Trading or Investing Training
- Offers a rich learning experience – Video Lessons or In-person Training
- Covers Technical Analysis – How to use Stock Charts and Indicators
- Covers Fundamental Analysis – Analysis of Profit and Loss Statements, Cash Flow Statements and the Balance Sheet
- Shows you how to create your own system – how to approach the market with your own strategy
- Has a good no-quibbles money-back guarantee for at least 60 days, so you can get a refund if it does not suit you
Typically most training courses available focus on Technical Analysis; this can be a problem because you need to understand is the stock you are buying is currently overvalued or undervalued by the market. Your training course has to tech Technical Analysis and Fundamental Analysis.
What is Technical Analysis?
Technical Analysis is the study of supply and demand in the stock market, by comparing the history of stock price movements and volume (the number of shares traded). Understanding the way the price moves in relation to the Open, High, Low and Closing Prices on a given minute, hour, day, week or month and comparing that to the volume can give an insight into future market direction. The data required is usually displayed in a Stock Chart, so it is easily consumed.
The Different Areas of Technical Analysis
The science/art of technical analysis usually fall into different areas of study:
- Supply & Demand – Stock Price Movement vs. Volume
- Trend Following – understanding what trends are
- Waves & Cycle Analysis – understanding how markets move
- Stock Charts – Price – plotting price in charts to understand the history of the Stock, Share, or Market Index using Bars, Candlesticks, or Point and Figure Charting.
- Trend Interpretation – Drawing Trend Lines – Support and Resistance Lines
- Price Indicators – the study of price based chart indicators or Oscillators know as Stochastics, “Relative Strength Index” (RSI), “Rate of Change” (ROC), “Moving Averages” (MA), “Moving Average Convergence Divergence” (MACD), Parabolic SAR, ADX Average Direction Movement Index.
- Study of Volume – understanding how the level of volume has a relationship with the price – and how the price has a relationship with volume.
- Study of Price Volume Indicators – “On Balance Volume” (OBV), Chaikin’s Money Flow, “Time Segmented Volume” (TSV), MoneyStream.
- Market Sentiment – understanding the madness of crowds.
What are the Positives Of Technical Analysis Courses?
If taught correctly, they can help you understand one side of the stock market equation. This is the “effect” part of the cause and effect equation. Technical Analysis Studies:
- the What – What has just happened
- the Effect – Not the cause
- the Market Action – what is happening “real-time” at the moment
- the Price
- the trends
What is Fundamental Analysis?
Fundamental analysis is what Warren Buffet has used so effectively over the last five decades to make himself a billionaire. The effective analysis of company accounts in the form of the annual reports it critical here. Any good stock market course should cover at a minimum the following topics:
- Company Accounts
- The Income Statement
- The Balance Sheet
- The Cash Flow Statement
- Earnings per Share
- The Price Earnings Ratio
- Book Value, Price to Book
The Liberated Stock Trader provides an excellent short course covering Fundamental Analysis here. https://www.liberatedstocktrader.com/free-stock-market-training/
Of course, this is all covered in depth with videos and books in the Liberated Stock Trader Pro Training here.
Where do most Stock Market Training Courses Fail?
Most stock market training courses focus exclusively on Technical Analysis; this can be misleading. I support technical analysis and am myself a Certified Technical Analyst, however having only an understanding of technical analysis can cause problems for the trader or investor. The main issues are:
- No grasp of economics – no understanding of basic economic facts of life can cause an investor to be trading in a business or economic climate that is fundamentally bad, reducing any probability of success.
- No grasp of company fundamentals – trading a stock that is on the edge of financial suicide reduces the odds of success if you are buying long. Of course, if you are shorting a stock, you also need to be able to understand the financial situation of a company.
What is Missing from Most Courses?
Many stock market technical analysis courses also do not cover vitally important questions such as:
- Economic Health & the Business Climate
- Company Fundamental Analysis
- Risk Management
- Portfolio Management
- Tracking Trades
- Creating a system
Also, most stock market training is extremely expensive, usually $2000 + for a weekend seminar.
Stock Market Education Summary
Now you know what to look for when deciding on a stock market education provider. Ensure the Technical & Fundamental Analysis is there, combined with a splash of economics and a good dose of Money Management, Risk Management, and Psychology / Mindset.
Other Chapters of the Liberated Stock Trader Book are listed below
This chapter sets the stage for the two key areas of stock market technical analysis and the fundamental analysis of companies including macro and microeconomics
This chapter looks at what REALLY makes the markets move, what causes boom and bust cycles, and how to spot them.
What are stock market cycles and the cycles of business and economies? Important information that you need to appreciate as part of your core analysis.
Next we move into fundamental analysis and the financial fitness of a company. All the major indicators and measures are covered.
Stock screening means using criteria to shortlist the kind of stock that you want to purchase. A vital part of any stock market training
Once you know the business climate, the state of the economy and you have shortlisted the stocks you want to buy. The next thing to do is the technical analysis. Even if the company looks great on paper, if the stock price is plummeting you do not want to buy it until it has bottomed out. This is called catching a falling knife. This is what chart patterns and technical analysis help with.
Here we get into the art of drawing on charts to help you visualize the Supply and Demand on the stock, the direction of the trend, and estimate how long the trend will last. Vital for you to establish buy and sell signals.
Which indicators should you use, there are literally hundreds of stock chart indicators? Each has a specific use case and application, which should you use?
Volume is a vital indicator along with the price. Both of these you need to understand in granular detail, you will learn everything you need to know.
Moving to advanced technical analysis we cover indicators such as parabolic SAR and point & figure charts.
How are the market participants feeling? Positive, Negative, or indifferent. Consider that 90% of people fail to beat the average market returns, sentiment indicators can be a great contrary indicator. Learn how to use them to your advantage.
Understanding how you want to invest, how much time you have, and your time horizon. These questions all help you to understand what type of investor you want to be, this then enables you to select the right strategy for you. Then we move on to building your stock investing system, a critical element to your plan.