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:
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.
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.