The lure to earn good money always gets the investors into the lap of stock market trading. Though there are a number of people who have made it big in stock trading, trading in equities is not at all easy. One need to have discipline and patience and it also requires research with a thorough understanding of the markets. If you want to invest money in the share market, you only have to ask any experts. They will tell you that the research to be done is challenging as it can involve the reading of charts, doing historical data analysis, and the like.
Adding to this, the stock markets have been quite volatile in the past few years and this had indeed left a number of traders in confusion of whether they need to hold or sell the stocks they have. In such a scenario, there is no such formula that has been discovered to achieve success with stock markets but there are some rules that can be followed to increase the chances of profits.
Stocks have the potential to provide higher returns compared to other types of investments in the long run. This is true that investing in stocks also comes with risks. Understanding the stock market and the concept of Risk vs Reward is crucial to creating a profitable investment portfolio. In this blog, we'll discuss some simple stock market strategies that can help you increase wealth over time.
How to make money in stock markets?
Know the kind of a trader you are
There are basically two kinds of traders in stock markets; one kind includes those who follow fundamental investing and the second kind are the speculators. The major difference between these two kinds is the way they see the price of the stock. The investors who follow fundamental investing give less importance to the price of the stock when compared to the speculators. Such traders are more concerned about the fundamental strengths of any company. To make good money in stock markets, one should practice the fundamental method of investing.
Learning about stock market trading in India is simplified if you know your own personality. Besides the categories of traders listed in the previous paragraph, you should also evaluate your potential for risk. Can you take risks? How will you face a loss, if any? Risk-taking behaviour is also related to your ability to afford your stock trades. Are you financially capable of affording losses, even though they may be initial? These are questions to ask yourself before you enter the fray of trading. You have to be physically ready and mentally astute enough to take highs and lows, especially the lows.
Try and avoid the herd mentality
Several traders in the stock market enter the arena with enthusiasm. Therefore, there is always a tendency for traders to rely on the opinions and advice of other traders. There is no way of getting rich very quickly. Still, For many traders, the decision to buy or a sell a stock is mostly influenced by their acquaintances. So, if everyone around them is investing in any particular stock, a potential trader too tends to invest in the same stock. Avoid such practices as such strategies do not work well in the long run. World’s greatest investor Warren Buffet was not at all wrong when he said that one needs to be fearful when the others are greedy and needs to be greedy when others are fearful.
As a trader, you should be aware to catch yourself when you are blindly “following the herd”, as you may do so without really being mindful of what you are doing. Each trader is different from the next, in terms of personality, goals, and trading strategies employed for investing. Moreover, if you go ahead and invest without considering the factors unique to yourself, you may find yourself more confused than when you started out.
Never try to time the stock market
By trying to time the market, one can lose one’s hard earning money in no time. A number of expert investors do advise not to time the stock market as no one has ever done this with success. It is really not possible to accurately catch the top and the bottom prices of any stock. Never follow such a strategy if you are planning for investing in delivery.
Have a disciplined approach for investment
Study the history of stock markets and one would notice that even the best bull runs in stock market have given a number of panic moments to investors. Due to high volatility in stock markets, a number of investors have lost money even when the markets had a bullish trend. At the same time, all those investors who have put in their funds with a disciplined approach have generated outstanding returns. If you have a long-term gain in mind, do have a systematic approach for investing. If you wish to know how you can invest with minimal funds, you must exert patience in your investment strategy. Studying is one way to get your investment planning on the right track, but stock investing has a lot to do with holding stocks for the long run. Historically, stocks held for a long time have great rewards for investors. Discipline and patience, therefore, go hand in hand.
Never let your emotions influence the judgement
A number of investors lose their money in stock markets as they are no able to have a control over their emotions. When trading in a bull market, traders have a lure of making more and thus they end up investing in wrong shares. Fear and greed are two factors that have to be controlled when trading in shares.
These are the two major factors that lead to the downfall of investors.
You should be able to determine when to exit a stock with a fair amount of returns in your hand, than stay on and take a gamble on the prediction that stocks will rise even further. Here, too, traders and investors tend to think like the next investor on the block and try to make big wins. Making money in the stock market is far from easy, and if you let emotions override rationality, you will elevate your risk.
Always have realistic goals
Traders can hope for the best from the investment they have made, but if they have financial goals that are unrealistic, they might get into some real trouble. Never expect the same returns from stock market and always have realistic and achievable goals.
Traders tend to lose a grip on reality when they have had some big wins in the past. This acts as a predisposition for future potential rewards. As a trader and investor, especially in the world of stocks and shares, you have to remember that one day is different from the next. Moreover, each stock is different from any other bought and traded in the past. Markets tend to turn, and this is the primary reason why equity tends to be volatile as an investment asset class.
Always invest your surplus funds
One might have heard stories about people getting into debts due to the investments they made in shares. If you are a beginner in trade, always use your surplus funds for investing. Once you start gaining profits, use the same amount to re-invest rather than opting for loans or debts.
The above mentioned are some simple tips that can help a beginner in stock trading. The first step to trading is to open a demat account and if you haven’t done it yet, do register for one right away.
Select a strategy that fits your goals and risk appetite. Stick to it in good times and bad. Remember that patience here is the key, it may change the fate. Trust the process and timings.
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