Stock trading entails risk; however, if you are smart with your investing you will be able to earn high returns. Your profits will depend on your ability to manage risk. Furthermore, how much returns you earn depend on your capital investment and technical knowledge. You may find some technical analysis software programs online; however, these have a few basic features. Professional software programs are expensive and you may not be able to afford these. Here are five factors that may help you kick-start your share trading career.
- Discipline
An important factor to minimize the downfall is to use the stop-loss trigger. When you use this order, the system automatically sells the stock if the price falls below the trigger price. You must determine the amount of loss you are willing to take before placing the order.
- Planning
There are several shares traded on the stock markets. However, you must shortlist a few industries and companies and focus on the same. It is recommended you choose shares that have a higher volume to ensure they are tradable. Opting for stocks with a daily average volume of at least 500,000 shares or trading NIFTY-50 stock trading is recommended.
- Demand and supply
You must always beware of the demand and supply of your chosen stocks. It is important you do not rely only on the bid and sell quantity data available on the screen. Technical analysis would help you to know the exact demand-supply position of a stock.
- Volatility
Experts advise choosing shares with a positive beta of 1 or more. A beta of 1 implies that the price of the share will move according to the market movements. For example, if the equity market sees a 2% decrease, the price of the share will also reduce by 2%. It is recommended you choose shares that have a maximum beta of 2 or 2.5 to maximize the benefits.
- Average out
Many people buy additional shares when the price falls to average out their purchase cost. However, it is recommended you exit the stock and wait for the right time to take a position again.
The aforementioned tips will help you understand the basics of trading. However, you must not expect to start earning high profits immediately. You need to develop your skills and gain technical knowledge to earn high returns.
If you’re just getting started, this infographic provides a brief tutorial into investing in the stock market.
Stock Price and Penny stocks
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