Why does a trader need stock indices? RTS and MICEX for the Russian stock trader
Many novice traders lose money and/or become disillusioned with stock trading because they do not know how to compare their trading achievements with what inflation, deposit or market movements in general could take away from them.
Profit perception mistakes
The only tool to analyze the trading results of many traders - a personal desire to earn a certain amount of interest. Where these goals come from, I don't understand! I just want to! And if this mythical profit does not come into my hands - there comes apathy to trade.
Fighting this disease is easy enough if you monitor your trading results once a month, comparing them with alternative investment strategies - stock indices, inflation rates and deposit rates.
There is a reverse, secret side of this disease. When a person boasts about his income, because compared to the deposit and even to the real inflation they really look posh. The person is full of soap, because he earned this money through speculative trading, day and night without leaving the terminal. And in fact, would have chosen a more conservative trading strategyoriented on a backbone of securities representing one of the major stock indexes, 2/3 of the profits he could take in style - "buy and forget".
What does a trader need stock indices for?
[info_block align="right"]Chose a more conservative strategy, focused on a backbone of securities representing one of the major stock indexes, 2/3 of the profits he could take in the "buy and forget" style.[/info_block]
Of course, comparing trading results with the dynamics of the major stock indices of the market in which you trade is a very important task. And when talking about stock indices, experts often put this function at the top of their agenda. Alas, for newbies this benefit of tracking stock indexes is not obvious. At best, they try to guess, and the word "guess" applies here, where a particular security will move.
In my opinion, attempts to play this kind of "guessing game" are irrational. Indexes are good for assessing the overall investment climate on the market, but not for predicting or explaining movements in individual securities. Even if a security has a large weight in an index, it is strange to assess exactly its movements through the index.
Seriously, Learn to use your market indices to assess your overall investment background. This is much more useful. It will help you decide on the size of the position.
In the future, this skill will help you predict the general behavior of bidders, and even make money on this general movement on the futures or options. If you like, I will describe in a separate text the peculiarities of stock index futures analysis. Please write this request in the comments.
Which index should Russian traders evaluate?
[info_block align="right" linkText="Affordable Investment Portfolio - the way from 50$ to 1000$" linkUrl="https://mr-trader.com/learn/forex-investicii-uspeh/dostupnyj-investicionnyj-portfel-put-ot-50-do-1000″ imageUrl="https://files.fortrader.org/uploads/2017/03/bag-730×344.jpg"]How to properly build an investment portfolio with 100$?[/info_block]
I believe that most of my readers work on the Russian stock market. The question is often asked here: which index should I follow - the ruble MICEX or the dollar RTS? To evaluate your personal capital, use the indicator that is tied to your financial plan. In other words, if the capital you manage on the exchange is needed in rubles in the future and your goal is to generate more rubles, then follow the MICEX index. If you are saving up for a house in Miami, then compare your earnings on the market with the dynamics of RTS index.
I use both major indices to assess the overall investment background. Naturally, due to the fact that our market is highly dependent on the behavior of the dollar, focusing on the RTS. MICEX helps me to estimate the local market mood, and RTS shows more stable movements. But the behavior of neither index can prohibit me to buy the necessary shares, but can only adjust their share in the portfolio.
Try to look at the indices in the way described, I guarantee that the positive effect on your trading strategy you will feel in a couple of weeks!