Stock trading always works when one follows it for a long time because it involves many things such as determining the financial ratios and the value of a company.
Trading is a profession that dates back to the time of the Barter exchange. During those days, two parties came together and made a deal for goods that one party needed and the other had. That formed the main foundation of trading.
A stock market is a place where buyers and sellers perform the transaction of the stocks. These business securities are listed on a public exchange and securities which are traded privately. The first modern stock was traded on the Nieuwe Brug in Amsterdam for the Dutch East India Company in 1602.
The first derivatives were traded in 1607 by a single company. However, the dividends were distributed after some years. Futures trading and options trading were also invented in Amsterdam after a few years.
Nowadays, stock market trading has gained attention even from those who know nothing about the share market and trading. Many people seek trading as a better investment option as it gives them a better purpose to extend their wealth.
Developing interest in the stock market made some people millionaires. However, there are other people too who have lost everything in the stock market. Do remember that the stock market is just like a game.
Here, you need to play with the securities and in return, you will receive outstanding returns. The most important thing while dealing in the stock market is that you need to place every move minutely.
Similarly, you need to know how to enter and exit from the market. Here the timing plays a very important role.
Below we will look at the general principles that will make your trading smooth and better than before.
1. Knowledge is Power
Knowledge is something that helps investors to get insight into the stock market. With adequate knowledge of the stock market, many people successfully increase their wealth. Also, top stock market giants such as Warren Buffet, Rakesh Jhunjhunwala advised many newbies to read books and learn the basic principles, gather information from different investors and apply them in the stock market.
Homework is the best practice when it comes to stock trading. Make a complete list of the stocks you want money to invest in. Also, keep informed about the companies that are currently doing best in the market.
2. Create a Trading Plan
Share Market Trading without a plan always leads you to failure. It is important to learn the mechanism of stock trading like how it works, how much volatile the stock market is, potential stocks, penny stocks etc.
Trading is a roadmap that tells you which steps to be followed to achieve desired results. A successful trading plan involves setting the target price, monitoring and following a trend, taking a price action and setting the maximum loss you can bear.
3. Always Begin with Small Quantity
Beginners generally have a curiosity to invest in many stocks. They invested in many irrelevant stocks and ended up making losses. Therefore, it is advised to focus on 3-4 stocks at a time and not more than that. Following a few stocks is quite easy as compared to other stocks.
4. Follow Conservative Investment Strategy
Conservative trading strategy helps to guard you against the downside. Plan your strategy in such a way that your losses should be minimum. In share market trading, everyone has to face some type of profit and loss.
It would be easier if you make losses as a part of trading. Therefore it is important to monitor your losses in a certain way that it becomes a part of your trading strategy.
5. Don’t Take Risk More than You Can Afford to Lose
Share trading is a risky job so don’t let it waste your hard-earned money. According to the stock market experts, if you are using leverage, you should be very careful about it. Please make sure that your risk is as per your trading strategy.
6. Don’t Ignore Stop Loss
When any person starts to trade, its primary goal is to achieve high profits. However, there will be situations when things go against your trading plan, hence as a result, you have to book huge losses so that you survive to fight another day. Stop-loss can do this for you. Stop loss is essential and hence it should be used for every trade.
We always think only about profit while entering the stock market. But it never happens every time, sometimes there are certain events where we need to face losses and hence it is also important to protect our downsides.
7. Identify the Situation When to Stop Trading
Investors often come across situations where our emotions dominate our pre-decided strategy and rules. This is the time where we need to refrain from our emotions and stick to the rules we set for ourselves.
For instance, if you lost in stocks of XYZ company, don’t make a mindset of retrieving the lost money from that stock only. Maybe that particular stock isn’t apt for your online trading strategy now. Hence, it is better to get out of it.
8. Build Up a Sound Trading Methodology That is Worth the Effect
Trading is not apt for those who become emotional during market time. In fact, it is for those who actively follow discipline, patience, methods and being unemotional. Even if you decide not to deviate from your methods and rules; in the long run, you will suffer if you don’t stick to your stock trading strategy.
9. Stay Focused When Trading
Trading needs a focused mind, and hence if you are doing trading, it’s quite essential to stay focused. Complacency can make you suffer. It is tough to make money in the market hence you need to pay attention to each detail. Being focused can increase your chances of identifying trends.
10. Don’t forget to take the Full Advantage of the Developed Technology
Trading is always volatile and therefore you need to stay updated with the current information in briefs such as charts, price movement, stock market news and other global news that is required to finger out the trend.
In addition to this, you would not want a situation where your orders did not properly execute as you lag somewhere. Hence, it is important to go for the technology where you will get all the essential information that keeps you updated while dealing with the stocks.