Investing in stocks have been an all time favourite for people who love trading. Investing in stock makes you a part owner of the company. Analysing the annual reports and drawing inferences is a step towards becoming a good stock trader. To become one, there are 3 pre-requisites that one must have:
Trading Account
Demat Account
Money
Getting first two is easy, which we shall explain as part of future trainings. But, the third point is the critical one. MONEY
They say one needs to have money to make money. Is it ?
Check out our website if you want to know some really cool and simple ways to start making money online. Once you have all the 3 pre-requisites and you are ready to multiply your money, these are 5 golden rules you must keep in mind.
Invest in a stock only if you can hold onto it for 10 years irrespective of short term developments
When you invest, you place your trust on the company. You believe that the company shall perform leading to rise in share price. As it does, you will make a profit.
It's just like investing on your education for 20 years with a hope that the knowledge you gain will fetch you a job or enable you to start your own business.
Our performance as students is seldom uniform. Sometimes it is at its best while sometimes it just does not work. But we never stop believing. We still hope for the best and keep trying.
Investing in stocks also requires having patience and not getting swayed away by short term deviations. It requires you to stick to your belief while staying aware about the changing market.
Feel the pride of owning a company's stock and start following the company
Recall the first time you got your salary. You might have done something special. You might have bough a dress or a smartphone; or a gift for your parents. Whatever it was, it definitely gave you a feeling of pride.
When you invest in a company and become a shareholder, you must feel proud of getting associated with the brand. You must follow its actions. You must appreciate the company for the good and also criticise for the wrong they do.
This would help you analyse the overall movement of the company, to ascertain if its actions are taking it in the path of growth or failure.
Never invest in a stock based on its past trends
Past trends have been the biggest enemy for any investor. Most people who invest based on the trend have a higher probability of losing their money.
In my experience. the best use of past trends is to understand the thought process of the company's leadership and the actions they take that lead to the spike in prices. With change in management, actions change leading to change in outcomes.
The law of supply and demand always brings a change to the trend. So check the trends, but never take a decision based on that. You are likely to fail 70% of the times.
Learn the unique art of accepting losses and sudden outbreaks
The pre-requisite of winning is loosing. Every successful person in the world has one thing in common. Each one of them lost hundred times before winning.
In stock trading, loss is like a low score on your mark sheet. It impacts your overall score, but When the data says something and a sudden change in market reverses the expected movement, things do not work in one's favour.
The idea is to learn from these incidents and take the next right decision.
Risk is your best friend, not your absolute fear
People have a perception that financial trading is a risky affair. Among them are the less risky ones like gold trading where people do invest. But when it comes to stock trading, it is considered the riskiest.
The fact is - With right knowledge, stock trading is 80% analysis and 20% latest events. Risk is defined as a decision taken without confidence on the certainty of the expected result. And in stock trading, the 20% awareness of latest events is what decides the risk level for an investor.
An investor might be really good at stock analysis, but without a real knowledge of the moving market, it becomes a high risk affair investing in stocks.
The simple tip for reducing risk is to replace it with knowledge.
Having followed these 5 golden rules on stock trading, investors across globe have turned thousands into millions. Let's kickstart your stock trading journey from here.
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