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How to Become a Successful Trader on the Stock Market

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Many people want to try their luck on the stock market. They think that they can make millions just by trading on the stock market, which is not true at all. They have to do some effort to be a successful investor/trader— there’s nothing wrong with that fact. Previously, Some people who don’t know much about the stock market and how it works, use to see it as a gambling opportunity where there is an equal chance of either winning or losing, they don’t do any fundamental or technical analysis before buying it.

Sometimes Investors who buy or sell on their “gut or feeling” about a stock are maybe right but most of the time they will be wrong. In this article, I also tell you about my personal experience about how I started my investing journey and what are sources which I choose to expand my knowledge.

I know there are many people and their blogs out there in which they tell you about some awesome strategies and things about the stock market like how to earn more money, how to choose stocks etc. and some of them are really good but some of them are long enough that I lost of my interest and I myself as a beginner needs some simple yet effective knowledge about it but in a concise format so I started reading about it through many books, blogs, interviews and make it in a simple format which makes it more understandable to me and I know there are many people who most of them are beginners want to indulge in and try to make money through the stock market but sometimes they struck, to how to start it what is the first step toward trading.

I also try to share what I learn as a beginner about stock investing and also some strategies that you can use while trading. So, here we go

First, Get Some Knowledge

You know many people see the stock market as the easiest and fastest route to double your investment, but in the pursuit to earn more money they forget to learn some fundamental knowledge about trading and investing and as a result, they lose money, and its a real truth that many people have lost their huge sum of money. So, basically, I just want to tell you first get some knowledge then start investing and believe me it’s not a simple thing to earn money from the stock market on a consistent basis without proper knowledge, and for knowledge, you have to read books on finance and investing to really understand the business and also know about how to do fundamental and technical analysis by your own

Some recommended Books — The intelligent investor by Benjamin Graham, Security Analysis by Benjamin Graham, Rich Dad Poor Dad by Robert Kiyosaki.

VALUE AND GROWTH INVESTING

Companies that consistently manage to grow their profits faster than their industry peers are called growth stocks. Their faster growth is generally the result of some sustainable competitive advantages. Since they need to constantly fund their growth, they typically pay out little or no dividends. The investors get a reward in form of appreciation at the stock price, a trader can really earn profit by investing in growth stocks these are the top 50–100 stocks in the stock market but these stocks are also risky

Value stocks are those stocks that are trading at a lower price than their intrinsic value but these shares have the potential to increase your wealth in the future. Some big investors like Graham Bell also called the father of value investing focuses more on value stocks for a long-term gain and other investors like Warren Buffet, Rakesh Jhunjhunwala is renowned investors who had to make their fortune through value investing. So, try to invest more in value stocks that have potential growth in future

It’s ALL ABOUT STRATEGIES

You can pick a stock based on fundamental analysis but the stock market is of a very volatile nature you can’t 100% sure that the price of a particular stock would surge. So, now it all depends on your strategies, which can make you or break you. So, it would be great to have a well-versed with your strategies beforehand. I will mention some of the strategies which have been implied by many and also takes a benefit from them.

Averaging down

When the stock price falls, you can use this strategy, to reduce the average price of the stock and also the break-even point(i.e., the point where get no profit no-lose). Try to understand with the following example:

Buy 200 shares @200–40000.If there will be a fall in the price of 50 rupees

Now, the 200 shares are trading @150–30000

Then, but additional 200 shares at a trading price i.e., 150 per share

Now, you have 400 shares, and your break-even point is also decreases from 200 to 175, which means now you can even sell your shares @ 175 without bearing a loss.

OR, if you believe that the stock price will rise to 200 then you can earn a profit of 10,000 rupees.

Averaging up

This strategy is also widely used by many traders to reduce losses and increase their winning chances. you can use this strategy

  • When price starts to rise to increase the profit
  • use it in a bull market
  • When there is significant potential in the stock

Let understand this with the following example

A’s invested in 1000shares of ITC Ltd. @ 1200 rupees, then the price starts to increase so A buys additional 1000 shares @ 1500, then again price starts to rise and again A buys additional 1000 shares @ 1800, Now let’s sum up, A has 3000 shares with the average cost of 1500.

Now there is also another investor B who also invested in 1000 shares @ the price of 1200 per share Now let’s calculate how much profit will they earn if they sell it at 2000

A has 3000 shares with an average price of 1500 so if sells at 2000 he gets a profit of 15,00,000. On the other side, A has 1000 shares with the price of 1200 and if he sells @2000, he gets a profit of 8,00,000

This clearly demonstrates how averaging up strategy can be profitable if made use of in a bull market.

The risk arises for trader A when there is a reversal in trend since he has pushed the average price per stock higher with each successive purchase.

Conclusion

There are many more strategies available which you can apply in your trading and soon after getting some trading experience you can develop new strategies according to your trading plan and goal and if you are a beginner and don’t have enough confidence first try trading in a trading simulator and practice it well before trying to trade in a real market. This will surely improve your confidence, and keep it in mind that stock trading is not a quick-rich scheme it’s like any other profession which demands knowledge, skill, dedication towards work.

Additional Tips

  • Bought share with 50% of total capital then after analyzing it for some time if you see it can grow then buy an additional share
  • Focus on reducing the break-even point to reduce your loses
  • Also, try to balance your emotions while trading don’t let your emotion take over you while trading. Frequently faced trading emotions like greed, regret, hope, etc.
  • Try to make a trading plan then act accordingly.
  • Never trade with other’s money because the stock market is very volatile
  • Only trade with enough money that you can bear in case of loss.

If you like this blog then please share this with your friends and groups. We will continue to providing you some more awesome content.

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About Post Author

Ayush Arya

Hey, I'm Ayush Arya, a blogger and also the creator of THE MILLENNIAL.
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