Many newbie traders directly jump into trading stock index such as Nifty 50 future or options, this can be a problem if they try in early stage of their career, without realizing that Index are most complex creature and require great deal of insight over the components stocks, sectors that make up the Index and macro picture of economy.
Here I am listing issues that makes relatively difficult for people’s to trade Index on day basis, but this might not hold valid for whole bunch of personalities, particularly those who have lot of patience and ability to sit tight, they might find index trading easier instead.
Lure for trading index comes from the fact that, daily it will have some decent price moves and trader need to focus on only single scrip that Index. which is kind of misleading. also many market gurus and self proclaimed naive analysts are fan of Index, therefore lot of index talk goes on daily.
Index gets huge media attention. this can tempt any trader, and this can be disastrous not just the money is lost, but years wasted without any knowledge gained and you its likely that you may develop wrong notion about markets.
First thing to understand is, Index trading does not offer much learning no matter how long you do it, whereas general market wisdom is stick to one company whose business and sector you can understand, follow related news and develop some personal connections to company and be comfortable with its price action, this can really make trading easier and investing too.
Those awful morning gaps
Daily large gap opening are common thing to see in case of Index, usually index, gaps up or down open and then you are left confused what to do as when the gaps occur chances of moving in either
direction are equal. So if anyone is a die hard Index lover I suggest they try after noon session.
Index is a special creature of huge inertia and lack trendiness, this inertia comes from different sectors companies that form Index, this inertia at times may support existing trend, but do no confuse that with a consensus of many
trader, basically those inertia makes index keep doing same stuff for a while, but it’s not equivalent to a trend, A random walk, for a better wordings.
Index trading needs lot of patience and more often overnight carry of your position, you must also have built-in resistance to cope up with random eruptions in opposite direction which often a trap. So find a suitable stock that matches your personality, learn it first, become comfortable, thats the way !