Do’s and Don’ts of the Stock Market



The stock market is a field where anyone can learn and earn. One can invest in the long term for their future goals or speculate in the short term as a second income. “It’s a Market of Stocks and not a Stock Market.” a classic famous phrase for all traders. Traders should be cautious while trading and choosing a stock because not every trade can be profitable.


To be successful in stock market trading, one should follow some dos and don’ts which may help to invest or trade wisely:


Do's:

  • Start investing as early as you can in a staggered manner. It will help build a strong portfolio and at the right opportunity, will fare higher returns. Thumb rule: Time in the Market is more important than Market Timing.

  • Do good research before choosing any company. If you are a beginner, take the help of an advisor. One must research the past stock trends of the company, the current political and economic stand of the company etc. before making a decision.

  • Do check the company’s background what exactly the company’s business is how much is the holdings, and their earnings (which include the top and bottom line in the financial statement)

  • Always follow the trend, keep strict stop–losses as well as enter at a correct level to avoid buying at high prices. Thumb rule: Buy low, sell high.

  • If you are choosing stocks for the long-term, choose scrips that have good dividend yield as they can act like a second income. When choosing stocks for day trading, always keep a track of movement in the stocks as well traded volumes.

  • Know what can be signs of surrender and book the lowest possible losses as soon as possible.

  • Always make sure that you are investing in a low-risk company and avoid bulk quantities of penny group scrips in your portfolio as when the market plunges, it can heavily affect these scrips.

Don’ts:

  • Never pay attention to rumours. Follow your gut, be confident and follow proper analysis such as fundamental, technical or verified news.

  • Don’t be greedy. It can make you bear heavy losses as most people want to earn money in a very short period and make mistakes while trading.

  • Don’t buy stocks and forget them with the hopes that one day they will give you returns. Keep tracking them.

  • Avoid trading in collateral until and unless you aren’t a risk-taker. Avoid trading in future and options if you are a beginner as it’s very risky.

  • Book profits partially rather than fully: booking full profits may come with regret as you never know the stock price may move upward after selling.

  • Don’t panic if the market plunges due to any news or global effects. Have patience as it is common for the market to show a downtrend due to any negative news. Most people start selling their holdings because of fear.

  • Avoid buying stocks when the market has already surged. Wait for a favourable level to start buying again.


These are some of the do's and don’ts that can provide a path for a successful stock portfolio.


 

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