Stock Trading Tips for Beginners
If you’re new to trading, you’re probably already aware that you’ve come to the perfect place to improve your skills and experience. This article designed for beginner traders and new users aims to help you better understand what’s needed to become a great trader. Check it out!
“The stock market is a device for transferring money from the impatient to patient”. — Warren Buffett
A stock market essentially brings buyers and sellers together to trade in stocks on the basis of fluctuations in their Current Market Price (CMP). It provides a company (that is listed with a stock exchange) access to capital while giving investors a “share” in the ownership of the company.
The market price of a share is affected by many factors which investors are able to predict with varying degrees of accuracy, depending on many external and internal influencing conditions, including political and economic factors (such as inflation, interest rates and shifts in fiscal policy), investor sentiment (creating “bull” or strong and “bear” or weak markets), and the business operations of a company itself (earnings announcements, partnerships, product changes, and many other technical factors).
As you embark on your journey to successfully participating in the stock market, you should take note of 3 key parameters: in-depth research, thorough practice, and intuition.
Here are some tips to get you started:
- Get your fundamentals right
Warren Buffet has rightly said “Risk comes from not knowing what you are doing.” So before jumping into the stock market, learn your basics well. It is important to be familiar with financial metrics and other stock market jargon. Your knowledge will help you take calculated risks. This doesn’t mean you have to gain the type of technical knowledge possessed by a hedge fund manager – but basic metrics like understanding Market Caps, and Price to Earning Ratios are important.
- Research well before investing
Once you are clear with the basics of the stock market, the next step is to do some actual technical research. Without adequate research, your investment decisions are more likely to be based on speculation. Apart from being appraised of the news and latest happenings, take a look at white papers, blogs and company reports. Make sure you study some of them before you make any trades. Being up to date with such information will help you anticipate the changes and make appropriate and timely decisions.
- Diversify your portfolio
As the old saying goes, “Never put all your eggs in one basket” – nowhere is this more applicable than with the stock market. That isn’t to say you can’t specialize in a particular industry (or even a handful of stocks), but trading with some variation and balance has its merits.
While the stock market may seem to be a road to easy money, it is also extremely unpredictable and volatile. A beginning rule of thumb is to invest in varied industries and varied stocks. In this way, you hedge your risk and can offset a loss made in one by the profit made in another.
- Be a long term player
Patience is the key to stock market investment. Control your emotions and make logical investment holding decisions and stay invested. Historically speaking, the stock market provides an average of 18% YoY return when the investment is undisturbed for a few years. Don’t settle for a quick buck, buckle up and prepare yourself for the long haul. That said, at the same time you can remember that you don’t have anything to lose on a virtual platform like Trakinvest, so experiment with long and short term trades to create a strategy that suits you best.
- Make the most of social trading
Remember that Trakinvest is a great platform to help you learn – not just by practicing virtual trading, but also by following and learning from other seasoned traders on the platform. With shifts in technology and social networking, finding the right person to follow is just as important as learning the fundamental skills yourself. Make the most of all that Trakinvest has to offer. Share your thoughts in the Discussion Forum so that you can ask questions and learn from others. Trak other users and monitor their trading activity in your Activities Feed to evaluate the strengths and weaknesses of your own decisions, and to help you make new trades. Social trading is a hallmark of Trakinvest, and a powerful asset you can use when it comes to learning the basics and practicing them.
See you on the floor.