Investing in the stock market can be lucrative as it gives you an opportunity to multiply your investments faster as compared to traditional financial instruments. However, you can also lose money faster if you are not aware of the basics of trading. As a beginner, it is better that you seek some professional help before making all the decisions by yourself. The brokerage fees will take away some of your earnings but an experienced broker will help you prevent the mistakes that beginners tend to make. Here are a few tips that you can adopt while participating in online trading:
Get a demat account first
Before investing in the stock market, you must have a demat account and an online trading account. A demat account means a place where all your securities are stored. Stockbrokers and brokerage firms registered with NSDL or CDSL can help you get one. However, you must also know the brokerage fees, account opening charges, AMC, etc. of various brokers before opening a demat account. It is because a lower brokerage will eventually help you make more money and improve your financial situation.
Make a list of stocks before investing
It is always better to pick some stocks before investing your money in the stock market. Carry thorough research on these stocks before finalizing them. Check their fundamentals, and historical movement, and observe the current trends and insights through trading apps before shortlisting your stocks.
To check the fundamentals of a company, you should read their financial reports, understand its business, and observe the future opportunities that it has to grow. Once you find a good company, you should also check its competitors to get a fair idea about that particular market. Large-cap companies are usually considered to be stable but things can turn around very quickly in the stock market. Therefore, it is better to prepare for the market volatility by creating a diverse investment portfolio.
Don’t put all your savings at once
It is understandable that you might feel the urge to invest a huge amount of money to earn bigger profits. However, experts believe that you must always start with a low amount. According to them, investing as low as 5% of your savings is enough if you are a beginner. Once you get a fair idea about how the stocks move according to the market trends and events, you can start investing and earning more.
Avoid bigger losses
When the market falls, all the growth that your stocks have accumulated over time will get wiped away. Now, you can be patient and wait for them to gain some momentum or cut short the losses by selling your stocks at the right time.
It is recommended that you predict the gains before investing in any stocks. Once your stocks reach the expected price, you can sell them immediately without being greedy. Similarly, you should know how much loss you can bear once the stock starts falling rapidly. It will help you to avoid huge losses especially when you have invested a bulk of your savings in them. Many trading platforms allow you to set a ‘stop loss’ or ‘take profits’ limit to help you trade without any setbacks.
Analysing trends and patterns
If you are able to reach candlestick charts that show historic movement of the stocks, you will invest in the stocks smartly. You will know the exact price point where you should invest your money or the exact time to get rid of the stocks.
Generally, stocks tend to show some repeated movement patterns over a period. You should be able to read these patterns to make informed decisions while investing your money.
Also, don’t be greedy and invest your money when the market is bullish. It may provide you short-term gains but you might also lose the money if you don’t sell them at the right time. Instead, it is always better to average up your stocks when their prices fall so that your profits get bigger when the stocks start moving up again.
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