In just about every aspect of life, there are rules that you have to follow so that you will not have any troubles. It also applies to the share market or stock market as well as you do not want to lose your investments.
Today, I am going to talk about some essential rules that will help you become a more successful stock market investor.
1.It is All About the Price
Most veteran investors know that buying stocks for relatively inexpensive prices is necessary so they can really bulk up their stock portfolio. The more shares that you have, the bigger your net profits will be.
Now, the basic premise of the stock market revolves around individual companies and how their share prices might improve over time.
You have to buy as many stocks as you can at lower prices so that in the event that the value of those shares increases, even incrementally, then you must sell it immediately.
That is why the volume high-frequency traders (HFT) has increased in recent years due to having a higher gain on short-term stocks.
The reason why more active trades are being done on an almost daily basis is that being liquid means more risk, but even better rewards.
No one can really predict how the stock market prices will move so if you make trades now like buying more shares for cheap and selling them for an even bigger price is necessary. In fact, there are some professional traders that would advise you to trade as many as 100,000 shares per day just so that you can stay liquid and avail of any profits there is in the current trading day.
3.Practice First Before Heading In
Share trading is a risky business. You could potentially earn a lot more than what you’ve invested or you can even run the risk of losing all of it as well.
It is best that you practice first before doing the real thing. You can either do this by using a trading simulator (there are plenty of them out there) that uses real market data and you can make virtual trades to enhance your stock market chops.
Or, you could invest in penny stocks or blue-chip stocks to test the waters first. The former is buying shares at dirt cheap prices while the latter is by getting stocks from well-established companies, providing you with a more solid base.
4.Don’t Go Way Out of the Box
Some investors try to out-think the market in the hopes of getting a higher gain. However, doing so will leave you penniless as it is, again, impossible to predict.
Remember the first rule? Always focus on the price. You want to focus on companies and sectors where supply and demand is kind of out of whack and you want to capitalize on that. In other words, you want to buy shares if the prices are low and you want to sell your stocks if the prices are high.