MARKET STRATEGIES FOR FOUNDATION MARKET

Any successful trader carries out his activities according to certain rules and a developed action plan, which together represent his strategy. Developing a trading strategy is the most important aspect of successful activity in the stock market, it eliminates randomness, leads to consistency, and ensures efficiency. Strategies may differ according to certain criteria: according to the timing of transactions - short-term, medium-term and long-term, and from here - speculative trading (in particular, speculative strategies) and investing; according to the direction of the trade - bullish - in a rising market or bearish - in a falling market; By the degree of acceptable risk—conservative (low risk), moderate (medium risk), and aggressive (high and very high risk). Other classification criteria can also be used, or the proposed points can be further detailed. For example, the short-term strategies section could include scalping, arbitrage, or others. A long-term stock trading strategy can be focused on dividend income or investing in undervalued stocks. IPO trading is also a separate area.

Top Investors in the Stock Market

The trading strategy on the stock exchange (as trading strategies on the stock exchange are called) divides all traders into two large groups - long-term investors and speculators. Long-term investors trade in bull markets, buying securities for the long term—more than a year—and making a profit from the difference between the purchase and sale prices, plus dividend or interest income if the securities are classified as such. Investors use fundamental analysis data, study the market situation as a whole and in individual sectors and industries of the economy, analyze the issuer's financial statements using balance sheet data, profit and loss statements, cash flow statements, study the dynamics, forecasts of rating agencies and other information that is related to the selected asset. An investor views the company they're considering buying as a business, assessing its performance, sustainability, and growth potential. Trading shares on the stock exchange is an art form for them.

Speculators or short-term traders typically trade intraday, profiting from the slightest price fluctuations. They use technical analysis data, with the exception of news trading strategies, where forecasts for key economic and financial indicators are essential. For them, the primary sources of information are price charts, trading ranges, the direction of the current trend, and strong key levels.

Long-term and medium-term trading strategies

Stock market trading for long-term or medium-term investors is based on fundamental analysis. Therefore, there are long-term and medium-term trading strategies. Here, it is important to consider a number of factors. This includes not only the financial performance of an individual company, but also the general trends and dynamics of the economy of a country, region, or industry. Investors know everything about the investment object - the company's history, the composition of the upper echelon of management, the business prospects, its market reputation, and, of course, they monitor financial performance, news, and much more. All this influences the choice of stocks for trading. Long-term strategies for stock trading can be of the following types: Portfolio strategies - forming a securities portfolio by purchasing different types of securities. A classic example is the distribution of investments between stocks and bonds in a certain proportion depending on market conditions. Experienced investors use more complex instruments such as futures and options. Buying securities of issuers from different sectors and industries helps balance risks in a portfolio. While some stocks fall, others, on the contrary, rise. During the 2020 crisis, companies related to tourism were hit hardest worldwide, as borders were closed; the aviation industry, as international passenger flights practically stopped; and representatives of the oil and gas industry were hit hardest amid the catastrophic fall in oil prices. At the same time, the retail and technology sectors grew actively. Distributing investments between different sectors helps smooth out or avoid significant losses during the collapse of individual markets.

• Investing in exchange-traded funds (ETFs) is essentially a portfolio strategy, the difference being that you don't have to build the portfolio yourself.

• A dividend strategy involves purchasing securities with high, stable dividends. Investors focus less on the stock's price growth and more on the issuer's dividend policy.*

• Investing in an IPO is the purchase of securities during an initial public offering on the stock exchange.

Choosing a stock to trade

As an example of choosing an investment object, we can consider the analysis of shares of the Chinese automaker NIO Inc. Fundamental data and overview In recent years, Chinese startups have demonstrated record results and attracted the attention of market participants. In December 2020, the manufacturer reported that it had doubled its deliveries for nine consecutive months compared to the same period the previous year.

Schedule of car deliveries in annual and monthly terms in 2020

In 2020, Nio more than doubled its electric vehicle sales to 43,728 vehicles, and analysts expect sales to reach 100,000 in 2021 as the company expands production capacity in China and plans to enter the European market. Nio plans to reach a production capacity of 10,000 units per month in the second half of 2021 and reach a capacity of 150,000 electric vehicles per year in the first quarter of 2022. The optimistic forecasts are somewhat overshadowed by problems with chips in the global market. The global semiconductor shortage has already forced almost all leading electric vehicle manufacturers to suspend work at their factories. NIO was no exception and was forced to suspend operations at its plant in China for five days at the end of March. 2021 has started off quite well, and some of the most successful stock market strategies have taken part in it. The official report for March and the first quarter of 2021 reported that 7,257 vehicles were delivered in March, which is a new monthly record and corresponds to a significant increase of 373% compared to the same period in 2020, although the low base must, of course, be taken into account. Year-on-year, sales increased by 352% in January and by 689% in February. Sales reached 20,060 vehicles in the first quarter, which is a new quarterly record and was 423% higher than the same period last year. Nio lags behind industry leaders in key metrics, but it is a young and fast-growing company that strives to make a profit. In the first quarter, the loss per share was 14 cents, compared to 39 cents a year earlier. Analysts expect Nio to reduce its loss per share by another 75% in 2022, as they expect revenue to grow by 80%. Wall Street forecasts that the company will reach the breakeven zone and achieve EPS of $0.23 per share by the end of 2023. Nio's investors include Baidu and Tencent. Experts are optimistic about the prospects for the electric vehicle market, both in China and globally. However, investing in securities of Chinese issuers is associated with significant risks, both internal and external. The unpredictability of Chinese regulators and the escalating tensions with the US are forcing investors to exercise caution. Competition in the industry has intensified significantly in recent years, and it is quite difficult for young Chinese manufacturers to compete with leaders such as Tesla Inc. or the vast resource potential of Volkswagen. Technical picture NIO shares reached an all-time high on January 11, 2021, at $66.99 per share. Since February, profitable stocks have been sold off along with other high-tech companies. Since the beginning of the year, industry leader TSLA has fallen by 9%, young Chinese companies have suffered more. NIO shares have fallen by 25%, Li - by 22%, XPEV - by 16%.

NIO, TSLA, LI, and XPEV Stocks in 2021

NIO's price is below the 50-mark MA near $39.5 as of April 1st. The 200-mark MA serves as support.

NIO, D

However, despite NIO's shares suffering from the sell-off, they could be added to an investor's watch list. The company operates in a country where the government is making significant efforts to accelerate the transition to green cars by providing business support. NIO's price, according to analysts, significantly outperformed fundamentals at the beginning of the year, but a recent decline has seen the company's shares reach a level that could be attractive to long-term investors. Given market volatility, a continued correction in the sector is expected, which could further reduce NIO's value. Analysts assess risks by looking at a security through a gradual accumulation of positions. When researching, investors can apply comparative analysis based on multiples such as P/E, P/B, P/S, and others, or use the free cash flow discounting method. In any case, the approach to analysis is consistent with the specific intraday strategy of each trader and bears the imprint of his individuality.

Short-term strategies

Intraday traders make trades during one trading session. Therefore, they are of little interest in the distant prospects of a business or industry. For them, the situation here and now is important. Short-term traders use technical analysis data. The main tools are the chart, the market depth and the quotes feed. Among the most popular intraday strategies are: trading from levels – breakouts, rebounds from support/resistance lines, trading false breakouts; channel trading; strategies using technical indicators; non-indicator strategies – price action, chart patterns, VSA; arbitrage trades. Trading on the stock market is associated with high risks. Therefore, the number one task for every trader is capital preservation. A working strategy is the first step towards solving this problem; represents a set of goals, methods for achieving them and the tools used. Any strategy is based on analytical market research, rules for opening and closing a transaction, conditions for holding a position, principles of risk and capital management. The knowledge, experience and personality of the trader have a great influence.