Anyone with a surefire system has already made a fortune and retired to a

private island in a tropical climate. He or she is too busy enjoying drinks with
umbrellas in them to share that surefire trading system with you.
Research Techniques
Used in Day Trading
Day traders need to make decisions fast, and they need to have a framework
for doing so. Thats why they rely on research. But what kind? Most day traders
rely heavily on technical research, which is an analysis of charts formed by
price patterns to measure the relative supply and demand for the security.
But some use fundamental analysis to help inform their decisions, too.
What direction is your research?
Securities are affected by matters specific to each type and by huge global
macroeconomic factors that affect every security in different ways. Some
traders prefer to think of the big picture first, whereas others start small. And
some use a combination of the two approaches. Neither is better; each is
simply a different perspective on whats happening in the markets.
Top-down research
With a top-down approach, the trader looks at the big economic factors: inter-
est rates, exchange rates, government policies, and the like. How will these
things affect a particular sector or security? Is this a good time to buy stocks
or short interest rate futures? The top-down approach can help evaluate the
prices in big market sectors, and it can also help determine what factors are
affecting trading in a subsector. You dont have to trade stock market index
futures to know that the outlook for the overall stock market will have an
effect on the trading of any specific companys stock.
Bottom-up research
Bottom-up analysis looks at the specific performance of the asset. It looks at
the companys prospects and then works backward to figure out how it will
get there. What has to happen for a companys stock price to go up 20 per-
cent? What earnings does it have to report, what types of buyers have to
materialize, and what else has to happen in the economy?
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