The Stock market is not just one place; the stock market, forex market, Real estate, cryptocurrency market etc. are all forms of it. The market is where you invest your money. The stock market is where you invest your money in stocks and no other asset.
Since we are talking about stocks, the main crux of this article will be the tips that help you survive the stock market. So let’s answer some basic questions first:
What is the difference between a stock and a share?
The stock is a metric representing the part ownership of the holder in the company, while the share is the single unit of the ownership in the company. A simple statement can understand this.
On the other hand, John bought 300 shares of Company X. Jacob holds 5% of the company shares. These are two very different things.
What is the stock market?
A stock market can be an exchange or an index where all the country’s stocks are listed. There are different sectors of the economy of a country, and each industry has some stocks.
For example, there is the energy sector, F&B sector, Automobile sector and a lot more. Each of these has a couple of bluechip stocks and some other stocks. The blue chips are the ones that hardly move in the short term. These are also called the haven of the stock market.
The reason behind this is the fact that these stocks will show very little or no volatility. So theinvestors invest their money in them, and that money is thought to be in safe hands.
What is the difference between Trading and Investing?
The only difference in trading and investing is the duration for which the stocks are held. The traders, also called intraday traders, will open a position and close it before the trading day ends.
The investors look at profits in the long term. They want to buy a stock and then hold it for as long as they want to or till the time their goal is achieved. Investors have different strategies to follow.
What they look for in a company before putting in their money is the fundamentals. The traders are technical-heavy, keeping the fundamental analysis at bay after a point of time. What they look for are the best companies in terms of volatility and strong fundamentals.
Investors generally have a good capital that they put in the stock market, and the traders have typically lesser capital. Of course, this can vary, but in the end, the traders have to put in a more considerable sum if they want to make more.
Which is better, trading or investing?
This is a subjective question; trading and investing are both different in their own pace. Trading requires some time before the trader becomes an expert in the market and starts making money.
Investing needs some time before the investor studies the market and becomes someone who can understand how things work and let the money work.
Traders and investors also have different goals in their minds before they enter the market. The traders want to make money based on everyday volatility.
The stocks that are volatile are unsafe; that is what the investors think. But the stocks that are volatile are the ones that will give the money, this is what the traders think.
This mindset sets both classes apart.
What are the best stock market tips and tricks?
The one single “trick” that guarantees for sure success in the stock market is consistency.
The traders have to trade every day just to get a hold of the market. Things are different while trading demo.
The consistency decreases because there is real money involved.
That has to be managed first. Apart from that, tips can be a lot, depending on the kind of mentor you are looking at.
If the mentor has been a bull all their life, then that’s the kind of advice you will get. If the mentor has been a bear, expect the same.
But since you are reading an online article, let’s keep the vibe neutral here.
1.The right stock broker:
The correct stock market broker is very important. The money that you will deposit in your brokerage account will be the first and the most significant trade you will ever make.
If you are lured into scams where the con artist promotes a broker that is not that good in terms of quality and is a scam, then all the money placed is a bygone.
Make sure the broker you are trusting is a regulated broker and has all the regulations in transparencies.
The first thing you need, and you need it before being consistent, is the correct stock market broker If you are a beginner then we recommend you the leading online broker.
The broker has been in the market since 2019 and has been serving its clients to the best since. With HFTrading, the traders can trade on more than 300 CFD tradable assets via three different trading accounts. Each account is handcrafted by keeping the level of expertise a trader might hold.
The broker is a trading name of the CTRL investments Pvt. Ltd and is regulated by the FMA.
2. Keep an eye on what you begin with.
Don’t look at the money you are about to put in the market in terms of sufficiency, but also make sure that it is not the money you cannot afford to lose. Things in lifeare more important than trading, like putting your kids in school or looking after your ailing parents.
If you are saving for such things, do not put that money inside the market.
In terms of sufficiency, study the asset you are about to trade in and make sure that the capital you are putting in, is enough.
In the initial few months of your trading career, you should refrain yourself from using things like derivative instruments and margin trading. The traditional ways of trading need you to put a lot of money in the market. So research properly and put in the correct amount of money at the right place.
The only second thing to being consistent in the market that can guarantee success is research. Volatility is mostly because something regarding that or sector has happened. If something has happened, the media must have covered that.
Always have a mindset that whatever you knew of the asset in technical terms, is a waste after a few days. You have to research the involved asset or stock at least twice in a week. Only then you can ace trading.
Researching about the market and being comfortable with new findings is what makes the best traders out of rookies. Consistent trading is important but consistent research is crucial.
The things like what the announcements are that led to the movement in a currency pair (for example) can be known only via research and the things like which candlestick pattern resembles what can also be learnt only via research.
4. Stop Loss:
As the name suggests, the stop loss is something that can stop a loss. Let’s understand what a stop loss order is. Just for analogy purposes. Think of yourself as a thief who knows a certain neighborhood better than his own.
Now you know how to hop inside different houses and the most likely entrance you will want to make is via the roofs. There is no second thought that your parkour skills are good but what if you fall?
There are going to be injuries and jail time too. What would you do in this hypothetical situation to stop yourself from such a thing?
If I were you, I’d put a net between the roofs of the houses just to ensure my safety. That is what a stop loss is, a net between two roofs.
The stop loss order will ask you a value, you enter that information and your trade will automatically be exited as soon as the price reaches that level.
Think of the stop loss levels very carefully. Never take too much for granted, if you think that you will not be able to bear the loss after a certain price level, amake it the stop loss level there and then.
Don’t think that you will manage. Nothing can ever be managed in the stock market. Only the right steps can be taken.
Do NOT short sell in the beginning:
Short selling is when you think that a particular asset will fall and you ask your broker to sell some stocks of that company for you and then you buy them back at lower prices after a week.The week’s time is the settlement time.
If you think that the asset will plunge and you short sell it and then it doesn’t plunge then no matter what the price it holds after a week, you will have to buy it back. The whole game here is of correct speculation and if you cannot do that correctly, do not go in the swirl of short selling.
Short selling sounds even better when combined with leverage but without the right experience, both of these things combined can make your trading career look like a stupid joke.
Leverage is for veterans:
We say this because, the way leverage works can be toxic for some people, leverage is something that can amplify the loss and profit both. Before you put yourself in the hands of margin trading, understand how leverage works.
Here is a gist:
Say that your broker is giving a 1:100 leverage and you are exercising it with $1000. This means that you are operating a position worth $100,000. Such a position can reflect volatility in a way that will make your capital vanish in a go.
If you are trading in leverage, and the trade goes right, then everything is well and good.If the trade goes wrong,then the broker will ask you for the money that the position held, not the one you used to enter that position.
Also, the price movement will be reflected in your capital. Imagine a situation where the asset plunged and in your account, the capital reduced to $200. You know that the asset will only rise after this but the broker will not believe you. It will make a margin call.
In the margin call, the trader is asked to push funds in the brokerage account and if they fail to do so, then the broker has a right to exit that trade on behalf of the trader. It does not matter if that trade would have made you a couple of grand but if the margin calls are not met, then there can be no possibility of you as a trader to exit it on your own.
Do not invest in a business that you know little of:
Investing in a business that you do not understand a lot of, is a bad decision. Since you are unaware of the incidents that will make the market move, you will either not be able to profit from them or will see a loss just because you were not attentive enough.
The whole idea of trading and investing is about putting your money at a place where you see it grow and also,make bets according to the stock market and price movements. If a trader has been making a lot of money from the commodities market and suddenly decides to trade with the automobile sector, is most likely to see loss.
Trading is something that needs a lot of patience and time in the stock market. These are just the things that can lead you to success but keeping all of them in mind will not guarantee success as well.
The key to success is not known to any trader. All they have been, is consistent in the market and the things happened the way they had to.