how many stocks/markets shall i focus on?

[jonboy123]

hi, im new to trading.
Ive been reading books etc and say if someone says "focus on a few markets". Start with small number of markets. Get to know them etc.

What does "markets" mean? In this instance....

- UK market?
- FTSE or AIM market?
- eg UK banks?
- British airways company= one market?
- Oil sector = one market?
- forex = one market......and Equities = another market ?
- stocks = one market..... options = one market.......?

One book says we should pick two or three dozen stocks and focus on them.
So say if you pick 20 diff companies.....does that mean 20 diff markets??

Should i focus on one sector? eg Oil.....and pick only companies from that sector?
So there would be numerous companies in ONE MARKET?

Ive also read that we should pick one or two hot industries currently. And then pick companies from there.

Say if im looking at UK equities.
Should i be looking at the Index in general first? eg FTSE Index charts? To see which group of companies, or sector is doing well? Does each sector have a genral Index where you can see if its doing well or not?


Thanks for any help.

 

[Masquerade]

For starters do you have any expertise in sectors that you know about? That would make trading shares easier as you could use your knowledge to your advantage.

Jumping on "hot" sectors is risky business and you shouldn't just buy shares in a company just because the sector is hot. You need more reasons than that. You can see how the sectors are performing too.

As far as markets, i'd consider markets to be the entity such as equities/FX/bonds/STIRS then you narrow it down. But when they say get to know your market they mean sticking to one or two fx pairs or only doing FTSE & Wall st, a few equities etc..

 

[jonboy123]

cheers.

so shares = one market?

No i have no expertise. But I have concentrated on UK stocks.
Im not saying i want to buy shares in hot companies. I merely researching.

So uk equities = one market.....but i can choose one diff company from each and every diff sector?

So it doesnt mean stick to one sector/industry? eg UK Retail.

Cause Uk retail is one market isnt it?
But also Uk equities is one market.

Its slightly confusing, what the advice these books are giving. They dont elaborate.

 

[Masquerade]

It can get very nit-picky defining things whether they become markets/instruments/sectors etc. For the purpose of your learning is it really important to come to a concise definition is the real question?

FTSE100 is a market
Financial/housebuilding/retail are sectors

For you, it is best if you want to trade equities to obtain knowledge in one or two sectors and then trade the main shares in that sector if you look to trade on a daily basis. If you have detailed knowledge about one or two sectors you can quickly pick up on merger/takeover and other relevant news to use to your advantage instead of trying to be a jack of all trades.

eg. Picking Mining/financial sector you'd be looking at the major movers eg. Mining: Rio Tinto, BHP, kazakhmys and so on. Financial: RBS, BARC, HBOS, HSBC.

 

[jonboy123]

right, that makes sense. Thanks.

Some websites have charts for diff sectors, so say if one sector is trending up, it would make sense to look at companies in that sector to trade, as the general trend of that sector is up......right?

Or should i be looking at the Indice...eg FTSE chart?

IF the FTSE is down trending, does that mean most of the FTSE companies are going down in share value?

So i should follow the individual stocks, as well as the Indice they belong to, or sector in general, right?

 

[Masquerade]

You have to understand that the FTSE is heavily weighted towards certain things and financials make up a large part of the ftse100 in terms of market cap. So if the financial sector is having a bloody day there's a good chance it'll reflect in the ftse100 indice having a red day. If the FTSE is down trending like what we've seen over the last year then in your question yes - most of the companies are going down in value. BUT, this goes back to weighting and just because the FTSE100 is down on a day it doesn't stop there being companies in the green so you need to look at it in more detail.

As for sectors, it comes down to market caps again. Something big could happen in that sector to one of the main players and that will reflect in the sector moving up, when in reality some of the other smaller companies in that sector will not reflect the same performance. Which is why I say you need to know the sector in more depth to understand instead of just looking at sector charts and trading purely off those.

Take a look at the bigger picture, eg. Housebuilding sector: ie. are people buying houses in these times? What's happening with interest rates? Is there a lot of reposessions going on and so on. Get your sentiment on the sector from looking at the wider picture, then apply it to an individual stock in that sector. BDEV, PSN....

 

[jonboy123]

MASQ: much thanks for the info.

Hot industry means a trending upwards SECTOR?
industry = sector?

Anyone else, fee free to chip in your thoughts.

 

[JackSmack]

i'm fairly new to all this myself but i'd say a hot industry means an industry that is seeing alot of movement & volatility but not necessarily trending upwards as you can take advantage of the down movements in the markets aswell? for example the housing market is suffering in the current climate so property & land companies are in the papers alot & therefore there are soom good trading opportunities available.

I wouldn't have thought you really needed a clean distinction between industry & sector as for example, the utilities industry would cover the electricity, gas, water sectors?

I think the point that the books you are reading are making is try to focus on one area that you can learn about, familiarise yourself with the economics behind movements in the markets & then trade accordingly. For example, focusing on the commodity markets, specifically oil, you will develop an understanding of the effects movements in the price of oil will have on the entire market - the oil companies themselves, airlines or anything that relies heavily on oil & then from this buy & sell stocks to reflect what you have learned. Focusing solely on "hot industries" that have been flagged up by a chart you have seen will mean you have very little knowledge of the fundamental reasoning behind what is making them "hot" & won't be able to trade effectively.

as i said at the beginning i know very little about trading & so i'm probably talking rubbish & so am interested in what replies this post gets.

 

[elitejets]

It completely depends what timeframe you are going to be trading and how much time you have.
If you are trading by scalping the FTSE on an 89 tick or 1min chart then you can only look at one.
If you are trading daily charts, even as a beginner you can look at many more markets.

 

[jonboy123]

jacksmack, no you are talking sense...thanks.

elitejets: i have no solid strategy as yet.....this is why im asking...... Ive conentrated so far on UK shares, and now am adding to that by looking at FTSE indice.

"many more markets"
what do you mean? HOw do you define market in this situation?
ftse? uk? fx? uk retail? shares? barclays?