One can invest in the stock market easily to get earnings through trading stocks but earning is not that much easy, especially for an investor with restricted funds. You need a well-defined investment strategy that can protect your money and increase the chances of a decent profit. You should have research capability for a sound understanding of the stock market temperament and its forces. You need to be passionate and patient at the same time.
Investing in the stock market is an excellent option to make an extra income especially at the present time when bank FDs are not offering significant returns. Following are some broad guidelines that help a salaried person should follow prudently to increase the chances of making profits through share trading:
1. Select a broker carefully
As you know, you need to open demat account to trade in stocks. While selecting a broker, check the status of the following services with him:
– Research tools
– Virtual trading services
– Cost of demat
– Investor education with experts support
– Customer services
You should practice trading virtually before you put real money in the stock market. Your broker should provide a virtual trading platform to assess your decision-making instincts. It will give you a sense of dealing with emotions while trading.
2. Research and Follow Current Trends
You should have reliable sources to get reports on market trends. If you are entering the stock market, you have to spend time in research seriously, and educating yourself about every aspect associated with trading, especially if you are aiming to be a trader. Educate yourself instead of feeling like entering into unknown territory.
3. Start Small
Even after you make yourself educated about the stock market and ready to the plunge now, start small. Buy a small number of stocks in a few well-established companies. You should invest surplus funds only because there is always a risk of loss.
4. Invest in Reliable Stocks
You will find a lot of choices to make your first move in the stock market. You need to be selective. Buy stocks of dominating companies in their industry. Choose a company with a long history of success. Evaluate its financial reports through its website. Look at its worst quarter also. Determine if it was repeated or not. You can compare the stock’s history with its peer companies. It will minimize the chances of loss. Stable stocks in small number are better than penny stocks.
5. Monitor The Markets Daily
You need to buy low, and sell high. Monitor markets daily to make decisions on whether you should buy or sell and reinvest. If you notice any stock values going up or down significantly, apply your trading strategy to earn a profit. Find out ways to learn the art of trading even if you are an experienced investor.
6. Keep an eye on the transaction fee
All investments have a cost, stocks also. For every trade that you execute, you need to pay a certain amount as transaction cost or commission. Transaction cost can be explained as overall expenses that a trader has to pay to execute trades. This varies from broker to broker even time to time and trade to trade. It is really important to keep an eye on transaction costs. Brokerage fees and transaction costs can potentially diminish your gains. Be careful while you are making a transaction.
Although there is no sure-shot strategy for profitable trades in the stock market, your informed-decision after educating yourself will surely increase your chances of placing profitable trades. Therefore, keep aside some time from your busy schedule and invest it in research. Follow the above-mentioned guidelines and take your time before starting stock trading. Keep Learning!