Recommended ways of Share Trading

  • Posted By : reliancesmartmoney.com
  • Sunday Sep 03, 2017

Key takeaways

  • Trader objective is to sell a stock when it yields an estimated peak-profit rather than holding the stock
  • Trader must understand market volatility which depends on macro-economic data and political factors
  • Elections in the USA, fed monetary policy, government policies and Economic indicators like GDP, inflation, foreign exchange rate, affect markets in a short term; such factors are more vital rather than long-term factors for share trading
  • In stock market, the law of demand and supply work reversely, meaning when price is high, demand increases and supply decreases (and vice versa)
  • Trader must master the art of stop loss and should always trade according to his loss bearing capacity
  • Adequate capital should be set aside and a trader must not risk this entire corpus towards a single stock

Usually done recurrently and for an interim period, share trading is buying and selling of stocks at a handshake price on the stock exchange (a meeting place for traders). There is a difference between investors and traders which needs to be understood well. Investors look at earning profits on a long term focusing more on fundamental-level growth of their stocks that is mostly based on business strategies of the company. Traders on the other hand, focus on short-term factors and trade according to their ballpark figures on a daily basis in order to gain significant returns.

We now suggest some key pointers that will help you gain potentially while also get you ready for share trading.

Desolate Emotions

The most common mistake people make while investing is that they gorge-on to their emotions. Being over-apprehensive and over-excited can lead to hasty and imperfect decisions. Trading based on your gut is a not advisable. It is important to hold a rational discretion at the mind’s level during share trading. Quit a stock immediately if it starts reversing in contrary to your calculation. Re-trade cleverly, manage your account sensibly.

Deflect from the Hearsay

Most beginners (even some experienced) fall prey to advice and suggestions given by others. . Even the wisest may slither seeing everyone go in the opposite direction, this is human; however, it is rightful to be methodical in your individual analysis and stick to it. Make instantaneous decisions based on your study and not because some other trader is doing so. If you don’t have the time to study then avoid trading. It would rather be better to put money in quality mutual funds for calculative returns.

Trade in Quality Stocks

There are numerous stocks that range from cream-of-the-crop companies with sound balance sheets to the debt-ridden. Thereby it is crucial that you check the past 3-4 year financial result of the stock, and certain key aspects like dividends given, PAT (Profit After Tax) and Overall Revenue before you choose to trade.

Parameter Quality Share Bracket

Dividends given in last 3 years

Consistent or incremental dividends year-on-year

PAT

Balance sheet showcasing incremental stride in PAT

Overall Revenue

Increase in revenue indicates company is growing in terms of customer base


This information is easily available on company websites; nonetheless, in case you are new to trading, it is most rational to trade in top 20-30 shares listed on NSE (www.nse.com).

Become Skilled at Market Analysis and Trading Techniques

The mantra of share trading is ‘Buy-Low-Sell-High’. Question is how to identify (foresee) these levels? The finest approach is to start educating yourself in-depth. Various books written by skilled and experienced traders and associated reading material are available on the internet which provides a comprehensive study on fail-safe trading techniques and methodologies.

Trust your Judgment and Limit your Profit-hunger

This is the main reason why most people fail in share trading. Once you have performed accurate market analysis, you now know when to buy and sell a share. Always stick to your assessment and trade on preset boundary values. Never get upset if you sold a stock at a level defined by your analysis and that share went on to make a life time high. The fundamental of success in share trading is discipline trading and having conviction.

Choose your Stockbroker Cautiously

People often end up giving a higher brokerage amount which limits their profit considerably. Check through every clause and any hidden costs before signing up. It is always a good idea to negotiate brokerage terms with your adviser if you are a regular trader.

To Conclude

It takes scores of persistence, study and order to become a successful trader. Trading is often thought of as a means by which one can instantly get rich; yet, this is never the case. In fact, trading is like business where one needs to be calculative and extremely careful in their decisions with correct strategy planning based on foolproof analysis. 

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