“The stock market is the device for transferring money from the impatient to the patient.” ~ Billionaire investor Warren Buffet
The stock market is unpredictable and confusing to a majority of the population. If you are looking for any set rules to make money in stock trading, then you’ll be disappointed, because there aren’t any as such rules, since trading here is majorly based on speculation. However, one quick tip would be to play the market like a fundamental investor like Warren Buffet, and less like a speculator. As a beginner investor, focus on the fundamental strengths of the company in whose stock you wish to invest, before thinking about the stock valuation. However, there are few quick tips that you need to follow if you want to make money with stock trading.
10 Tips to Make Money with Stock trading in India
Tip 1: Invest only in businesses you understand
A stock market investor must know that he should never invest in a stock but in the business instead. To reap the maximum for your hard-earned investment, it is wise to invest only in a business you understand or are familiar with, after researching the company well. (Here are more tips on how to get started with stock trading)
Tip 2: Act differently than the crowd
Herd mentality is very common in the stock market, where the tendency is for potential investors to invest in a particular stock if everybody around is doing the same. However, it is not a healthy strategy when you are investing hard-earned money, since it is bound to backfire, maybe not now, but in the long run. Be wise and make your own, well-informed decisions.
Tip 3: Have a broad portfolio
When you combine a variety of assets or stocks in this case, depending on your risk-taking capacity, to reduce the overall risk of an investment, you should diversify your portfolio. In the stock market, diversification of the portfolio is key to earning optimum returns on investments with minimum risk.
Tip 4: Stop loss order
Supposing you have bought the shares of a company at ₹95 a share and set a stop loss at ₹85. The shares will be sold immediately, once the price falls to ₹85. Stop loss orders could be your key to success, which helps you sell a stock after it slides below a price range. This way you can limit your loss, which is an important aspect of stock trading.
Tip 5: Never time the market
In the stock market, it is true that decline in account balance is more painful than missing a gain. However, timing the market makes you take impulsive decisions, not good for you when making money.
Tip 6: Master the skill
Stock trading is not a game, but a skill, where you should identify and focus of a few select stocks. Here, you should quickly get in and more importantly, quickly get out, while learning what you should do and what you shouldn’t. For instance, if a certain number of shares are up for sale, don’t buy the stock, where the reverse is also true. Don’t rely on the bid to identify the supply and demand in individual stocks, but a technical analysis of the numbers on the screen will help. Be intellectual to identify when someone is buying at a wrong point to take advantage of that situation.
Tip 7: Invest minimum capital
In the stock market, you can trade with less, but a certain minimum capital is a must, as volumes are important. Those who invest more than ₹2-3 lakhs can expect some meaningful gain. But invest only the surplus you have and not a part of your core savings. The invested capital shouldn’t be borrowed either.
Tip 8: Have adequate stock volumes
A minimum daily average volume of 500,000 shares is suggested by experts for the stock to be tradable. Adequate stock volumes allow the active day trader to enter and exit the trade on demand, where higher volumes make it easier, with very less or no slippage.
Tip 9: Trade in the most volatile market timings
In the Indian stock markets, 9.30-11.30 am is found to be a good time to trade. However, it is not advised to trade on news out in the market, as the stock price will take a few minutes to adjust to any news.
Tip 10: Be Patient
Patience is important when you put in your money in the right share, that too systematically, and hold it for generating great returns.
All the best!
Bonus Tip: Use a good stock trading app to help you with analyzing data and making the best decisions.
Hi, Mani Karthik here. Having lived in USA, India & Middle East, and worked for big MNC’s to startups, I have a lot to share with you. My aim is to help people, by sharing everything I’ve learned in life, through this blog. It’s read today by more than 150K people world over! I currently live in LA, California and visit India occasionally. Here’s my full story on who I am and why I blog. Connect with me on Facebook, Instagram, Twitter or WhatsApp (+001-408-489-4785). Happy to help! 🙂