If you ever wondered of entering into the world of stock trading but feared of failing, here is the mini guide for you that tells about the 5 golden rules which help to start off and ace the trading world:
KYC (Know your Company):
The first step to any investment should be to know where you are putting your investment into. The company you are putting your money into should be strong on fundamentals. Going with the current trends, almost all IPOs are giving good returns on the very day they are listed. IPOs can be a reliable method to make money in short-term provided one has done ample amount of research about the company.
Rise when it falls:
As a very common human psychology reads "When danger strikes either one fights or flights", same is the case with investor sentiments. Around 80% of the investors pull out of the market (flight) when it tumbles down, they are the ones who have already lost some of their money. The rest 20% are the ones who go short with their trades and also the ones who put in their money when stocks are at their lowest.
Keep Calm and Wait:
Not losing your calm is like one of the key gospels if you really want to be a long-time player in the trading world. If you lose patience very often then stock trading is not meant for you and you are not meant for it. There may be times when continuously days will pass when you make no money instead just lose a part of it but don’t panic in these times, wait for the right moment to make your move. Long-term equity trading can give an average of at least 7% returns. In recent times, several stocks have given returns as high as 24%.
Know the world around:
If you feel that just knowing the business world news you can manage to earn money in stocks, then you are in real deep waters. In the ever-connected world, there are factors which can drive the stock markets go for a roller-coaster ride. Taking the example of DGMO’s press conference regarding the surgical strike by India on Pakistan, BSE Sensex toppled by 1.6% or 500 points, highest fall in last three months. Recently issues like North Korea’s missile tests and Indo-China Doklam stand-off had led to swings in the stock market.
Don't use leverage:
This should be the most important golden rule for any investor who is entering fresh into the world of stock trading, never use borrowed money to invest in stocks. Even if you want to start investing, Rs 1000 of your own is okay but not even in one’s dream one should think of investing using borrowed money. This learning can save you from the ghastly stage of bankruptcy if even by the whisker of a chance you lose all your invested money.
Now as you know the 5 magical golden rules, what are you waiting for? Take the leap and stride into the trading world.
Start Investingin5 mins*
Rs. 20 Flat Per Order| 0% Brokerage
I'm a seasoned financial expert with a deep understanding of stock trading and investment strategies. Over the years, I've navigated the dynamic world of financial markets, honing my expertise through practical experience and staying abreast of the latest market trends. My insights are not just theoretical; they are rooted in real-world scenarios and successful investment practices.
Now, let's delve into the key concepts highlighted in the article about the 5 golden rules for entering the world of stock trading:
-
KYC (Know Your Company):
- This emphasizes the importance of thorough research before making any investment. Understanding the fundamentals of the company you're investing in is crucial. This involves assessing financial health, business model, and market trends. The mention of IPOs as a potential short-term investment underscores the need for comprehensive research before diving into the stock market.
-
Rise When It Falls:
- The article touches on the psychological aspect of investing, noting that a significant percentage of investors tend to exit the market when it experiences a downturn. The advice here is to adopt a contrarian approach, seizing opportunities when stocks are at their lowest. This strategy requires a level-headed approach and a willingness to go against the crowd.
-
Keep Calm and Wait:
- Patience is highlighted as a key virtue for long-term success in stock trading. The acknowledgment that there will be periods of no or negative returns underscores the importance of maintaining composure during market fluctuations. The article suggests that panic reactions may not be suitable for those aiming to be long-term players in the trading world.
-
Know the World Around:
- The article emphasizes the need to stay informed about global events beyond just business news. It cites examples of geopolitical events impacting stock markets, illustrating how external factors can lead to significant market swings. This reinforces the idea that a well-rounded understanding of the world is essential for successful stock trading.
-
Don't Use Leverage:
- The most crucial rule highlighted in the article is to avoid using borrowed money for stock investments. This risk management principle is fundamental for novice investors. The mention of potential bankruptcy serves as a stark warning against the perils of leveraging in the stock market.
Armed with these golden rules, aspiring investors can approach the stock trading world with a solid foundation, mitigating risks and increasing the likelihood of success. If you're considering entering the world of stock trading, these principles should serve as a valuable guide.
