A Day in the Life of a Trader

You’ve decided to get started as a trader oraddition, you may think you know which sector a
investor, but where do you start? The answer asshare or stock is in, but sometimes they can surprise
always is very simple and the process I will take youyou!!
through applies to virtually all markets (particularlyIt is worth checking on any share or stock that you
shares, stocks and derivatives of these i.e. optionsare considering as to details of any directors who
and spread betting) Once you move into otherhave bought or sold shares recently. The software I
markets (currency for example) you would have ause itemises recent deals which you can check.
different set of data and charts.Please do not give any dealings too much weight as
One important point to note, is that those of youdirectors are notorious for getting things wrong!! -
who have full time employment and are just doingthey often buy in a vain attempt to support their
this for longer term investment, or to build upshare price, and could well be selling as share options
experience, all of the following can be done in thebecome available or they have a divorce settlement
evenings or at the weekend. You may rememberto pay! If you see several senior directors selling
that I have said before, you do not need live data toheavily then this may be a signal that they know
start with - end of day data is fine. You also do notsomething that you do not!
have to be sitting in front of your screen day afterCheck when a company is due to pay its dividends
day, in fact it is better if you do not - you will onlyand the ex-dividend date. If you buy a share one day
become stressed!before this date then you will be entitled to the
OK, I am going to assume that you are going to bedividend, but if you buy on the day you will not be
trading shares/stocks/options or spread betting,entitled. There is a three day window between the
depending on your experience. I suggest that youex-dividend date and the date of record. On the date
would follow the steps below, to arrive at a short listof record all eligible shareholders are noted and these
of prospectswill be the people who receive the dividend. If you
In the evening or overnight, you would download allare not sure, check on the web site of the company
the daily data, and your charts would be updated to- they should have an 'investor' section which will
show the price action for that particular day. If youdetail all past dividends, payment dates, history etc
are trading the US markets then the data wouldAgain, check to see when the company is likely to
probably have to be downloaded the following day asbe announcing its results. You do not want to buy
the markets only close at 9.00 pm UK time andthe day before the company is due to announce its
update overnight. Now the general approach is calledannual performance etc. ( you may consider this a
top down investing, because it is just that - we startgood idea - that is fine - all I am saying is make the
with the big picture and work down!decision in the full knowledge of all the facts ).
You would start by analysing the major indices forTrading through announcements can be difficult. In
the market you were considering. For the UK youthe US it is particularly difficult as results are
would look at the FTSE100 index ( 250 and 350) , forannounced quarterly and almost as soon as one '
the US the DJIA index etc. This will give you a viewearning season' is finished, another one starts. In the
of the overall market, strength, weakness, support,UK it is not quite so bad, with results generally
resistance etc. Look at the daily volumes for unusualannounced half-yearly or annually.
highs or lows. I would check the charts daily forOn the broader front, keep an eye on the following :
volume anomalies.In the broad economy there are four clear periods to
All shares and stocks are divided and sub divided intothe economic cycle. It is important that you try to
various industry and market sectors. You need torecognise where you feel the country is economically.
analyse each industry sector chart, for strength andThe four are, full recession, early recovery, full
weakness, as well as support and resistance. Afterrecovery and early recession. As the economy
all, it makes sense - you do not want to be buyingmoves through this cycle which is repeated, various
shares or stocks in a sector of the market which ismarket sectors become more important and others
particularly weak or selling short in a strong sector.less. The markets tend to lead the economic cycle. In
(Most good charting packages will give you theearly recovery industrial, basic industry and energy
facility to chart a share price with its performancesectors tend to lead, in full recovery staples and
against the market sector.) Naturally, there is noservice sectors tend to lead, in early recession utilities
guarantee that any share you choose within a sectorand finance sector stocks tend to lead, and finally in
which is performing well will guarantee it will followfull recession cyclical and technology stocks tend to
the trend, but it is a reasonable assumption to makelead the way. Naturally these are only broad
as a start. Having identified what we feel are theguidelines, but it is worth trying to establish where
stronger and weaker sectors, then we move on tothe economy is, at any one point, whilst you are
look at the shares/stocks themselves. I wouldtrading.
probably only check the sectors once a week.In trying to arrive at where you feel the economy
Understanding and identifying industry and marketmay be, listen to the announcements on interest
sectors can be notoriously difficult. A good place torates etc. You will almost certainly form your own
start is often the main exchange where details canview of the economy from your own experience of
usually be found - be aware that these do vary fromhouse prices, job opportunities, and retail knowledge.
country to country and exchange to exchange asTry to use common sense rather than trying to
there does not seem to be any standard in place atacquire some deep knowledge of facts and figures
the moment.that only economists understand. After all, if they
Having downloaded the end of day data, I wouldknow anything of value they would have retired long
then check all my charts. As always, you would lookago. Try to think in a common sense way.
for trends, volume, support and resistance, breakoutsKeep a check on oil prices. This is not normally good
from a channel, turning points and candle patterns.news for the markets, as increased raw commodities
You would also consider price movements on thesuch as oil, can only increase company’s costs
day - the package I use offers the facility to set aand therefore reduce profitability. Despite this in the
filter which identifies shares which have moved up orlast 18 months with oil at record levels, shares have
down 2% on the day. A move this size mightcontinued to move higher.
indicate a share that is active. Once you haveKeep an eye on the price of gold, because it can be
identified a list of possible prospects, you would thenan indicator of political uncertainty. It can also have a
compare them with their sector, to see whetherdirect impact on mining stocks (look at oil prices
they were in a good sector or not, and how theyrecently)
were performing relative to the sector. If theyAnd finally, remember, you are in this to make
looked OK, you would add them to your watch list.money – not for fun. If you are looking for fun
Remember that an important part of moneyor a thrill, try the on line poker or horse racing.
management is to diversify your portfolio - so pleaseTrading and investing is hard work and is about
do not build your portfolio in one sector - this ismaking money – not losing it!
another reason sector analysis is so important. In