Do you know that a trader is essentially a stock picker?

[i4value]

Stock picking is the process of selecting individual stocks to invest in within a broader stock market.

Many think that stock picking is not a common approach given the many funds, ETF available. But it is more common than you think.

There are various approaches to stock picking that can be categorised into

• Fundamental analysis – value investing, growth investing and income investing
  
• Technical analysis – using charts, technical indicators, trendlines
  
• Behavioural analysis – monitoring news/social media. I would include following insiders buying here
  

Looking at the above, you will see that trading via technical analysis is actually a stock-picking activity.

Given this, do traders actually follow the key requirements for stock-picking ie do you know why you are trading a particular stock?

For the retail investor, the stock market is a zero-sum game. Every time you buy thinking that prices will go up, there is someone on the other side selling thinking that it will come down.

Only one of you can be right and to put the odds in your favour, you should know what you are picking a particular stock.

• Do you have a well-defined trading plan that outlines your trading goals, strategies, entry and exit criteria, and risk tolerance.
  
• Do you have a risk management strategy that includes setting stop-loss orders to limit potential losses and position sizing to manage your portfolio's overall risk.
  

Are you clear why you picked a particular stock when there are lots of others to choose from?

I am sure that traders can learn from those who are more commonly associated with stock-picking ie the fundamental investors.