Nigeria's Stock Market. Investor's Woes and possible Solutions (2)

Welcome to the next session of my previous post concerning the Nigerian Stock market and techniques on how you can reduce your losses, generate more income and improve your financial status, even as there are signs of recovery in the economy.

Although most of the case studies, examples and situations i have been using and would still use in this post stream are mostly Nigerian examples, they are techniques that are applicable in any market, in any country because they are basic and fundamental investment principles applicable over any investment platform.

Continuing from my last post, i remember i talked about another technique you can use to make profit swings in these periods which i termed Spot Trading (Speculative Trading). Speculative trading involves in literal terms "looking at a stock, buying it today and selling it tommorrow at a higher price.". Although it is that simple, there are a little more intricacies involved.
Speculative trading is a technique currenhtly in use by most hedge funds and investment managers. Although it is mostly used in foreign exchange markets (which i will talk about later) with great profits, it is a technique applied to equities also with good revenue opportunities. By studying a company's activities over the past two to three months, you can determine a relative price action. In fact, over this period, some stock prices have constantly flunctuated between a "HIGH" and a "low". The "HIGH" being the stock's highest price in the period under review, and the "low" being the stock's lowest price in the period under review. For those of us who have been studying stocks for a while now, because of the technicalities of PRICE ACTION, there is always a tendency for a stock price to eventually go back up to its former price whenever it falls to a paticular price. Usually, these drops and rises in prices are based on the volumes of the stock sold on the floor of the exchange. So when these prices drop, there is a huge tendency for them to rise back except the company is going through some financial difficulties and thus the chance for you to capitalise on these price swings to make extra profit.

For some more technically advanced traders, speculative trading could be based on implicit company data which can be used to assume what price action would be like on the following day of trade, for a non technical trader like you, trading with this method has to involve you determining the "HIGH" for that period, noticing how consistently that "HIGH" comes and goes and buying that stock when you have the lowest "low" again.
As against the former technique i discussed in my previous post which is a long-term investment strategy, this is a short term investment strategy and is actually a good method for those who like to be involved in the intricate calculations of their investments

The question now is to determine when price action is not as a result of ailing company finances and i will be discussing that in the next chapter of this post. Until then, never stop thinking of how to make the best out of your investments