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The greed to earn good money always gets investors into the trap of stock market trading. As we know that there are so many people who have made it big in stock trading, but trading in equities is not that easy.
The trader needs to have discipline and patience and most require research with a thorough understanding of the markets. If you want to invest or trade in the share market, you only have to ask any experts, the real one.
Important: Don’t get into the trap of an unregistered trading specialist. Specialists will tell you that the research to be done is so much challenging as it can involve the reading of lots of charts, doing historical data analysis, and many more.
The stock markets have been quite volatile and risky in the past few years and this had indeed left many traders in the uncertainty about whether they need to hold or sell the stocks they have.
In this scenario, there is no such sure formula that has been discovered to achieve success with share markets but there are some important rules that can be followed to increase the chances of profits.
1) How to make money in stock markets/Share Markets?
First Rule – Know which type of trader you are.
Basically, there are two types of traders in share markets; one type includes those who follow and research fundamental investing and the second type are the speculators. The difference between these two types is the way they see the price of the share.
The Investors who follow fundamental investing give less importance to the price of the share when compared to the speculators. These traders are more focused on the fundamental strengths of any company.
To make good money in stock markets with a long perspective, investors should practice the fundamental method of investing.
It’s very easy to do share market trading in India if you know your own personality. You should also evaluate your potential for risk and the only important question you should ask yourself is, Can you take risks? How will you handle a loss, if any? Risk-taking behavior is also related to your ability to afford your share trades.
Are you financially and mentally capable of affording losses, even though they may be initial? These are very important questions to ask yourself before you enter the net of trading. You have to be physically ready and mentally capable enough to take highs and lows, especially the lows.
2) Try and avoid the herd mentality
Many traders in the share market enter the arena with enthusiasm and earliness. Therefore, there is always a mentality for traders to rely on the opinions and advice of other successful traders.
But the hard truth is there is no way of getting rich very quickly. Still, For many traders, the decision to buy or sell a share is mostly influenced by their surrounding persons. So, if everyone around them is investing in any specific Share, a potential trader too tends to invest in the same Share.
Traders must avoid such practices as these strategies do not work well in the long run. World’s greatest investor Warren Buffet said that one needs to be fearful when others are greedy and needs to be greedy when others are fearful.
As a trader, you should be alert when you are blindly following the herd, as you may do so without knowing what you are doing. Each trader is different from the others, in terms of personality, goals, and trading strategies used for investing.
If you go ahead and invest without bearing in mind the factors unique to yourself, you may find yourself more dazed than when you started out.
3) Never try to time-bound the stock market
By trying to time-bound the market, traders can lose their hard-earned money in no time. Most expert investors do advise not to time-bound the stock market as no one has ever done this with success.
It is really not possible to accurately catch the very top and the very bottom prices of any share. Never follow such a strategy and strategy planner if you are planning for investing in delivery.
4) Have a disciplined approach to investment
Study the history of share markets and you will notice that even the best bull runs in the stock market have given a number of panic moments to investors. Because of high volatility in share markets, a number of investors have lost big money even when the markets had a bullish trend.
At the very same time, all those investors who have invested in their funds with a disciplined approach have generated outstanding returns. If the investors have a long-term gain in mind, do have a planned and systematic approach to investing.
You must exert patience in your investment strategy if you wish to know how you can invest with minimal funds. Studying is one important way to get your investment planning on the right track, but share investing has a lot to do with holding shares for the long run. Historically, shares which held for a long time have great rewards for investors. Discipline and patience, these are two keys.
5) Control your emotions, it influences the judgment
Most investors lose their money in share markets as they don’t have control over their emotions. When trading in a bull market, traders have a greed of making more and more and thus they end up investing in the wrong shares. Fear and greed are the two factors that have to be controlled by investors when trading shares.
These are the two major factors that lead to the downfall of investors and traders.
You should be able to know when to exit a share with a fair amount of returns in your hand, then stay on and take a bet on the prediction that stocks still will rise even further. Here, too, traders and investors will think like the next investor on the block and try to make big money. Making money in the share market is very far from easy, and if you let emotions override you, you will increase your risk.
6) Always have realistic goals
Traders hope for the best profits 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 the share market and always have realistic and achievable goals.
It’s easy to lose a grip on reality when they have had some big profits in the past. As an investor and trader, especially in the world of shares and stocks, you have to remember that one day is different from the next day. Moreover, each share is different from any other traded and bought in the past. Markets always turn, and this is the primary reason why equity tends to be very volatile as an investment asset class.
7) Always invest your surplus funds
Investors and traders might have heard many stories about people getting into debt due to the investments they made in shares. If you are a beginner in share trading, always use your surplus funds for investing and trading. Once you start gaining profits, use the very same amount to re-invest rather than opting for debts or loans.
The above-mentioned are some simple tips that can help a beginner in the share market. The first step to trading is to open a demat account where security is high and commission is low and if you haven’t done it yet, do register for one right away.
