Share trading can help you to earn extra income and increase your savings that can be deployed again. Buying low and selling high is the strategy used majorly in the stock market but it’s not the only one. You have to deploy your money and do multitasking.
Two main actions that an investor can take to maximize their earning in the stock market are:
- Price Action
- Investing for dividends
Let’s elaborate one by one.
Price Action Strategy
If you consider trading as a game, win it by following the value investing strategy. You will be closer to making profits through stocks with good repo – the stock will hopefully rise in value. Value investors wait for the sale price of value stocks. To buy higher value stocks, you can take advantage when such stocks are on sale and undervalued at a price that is cheap enough to buy at least 100 shares.
In this way, you can cut the cost for the stock you purchased and maximize savings. You can follow the momentum strategy to maximize profits. However, it tends to give the best results to shorter-term investors i.e. intraday traders.
Invest for Dividends
Dividends can be defined as the fee a company will pay you in exchange for using your finances. A dividend is a stable income source for the long-term investor. You are in the speedy high-tech world so, maybe, investing for a dividend will not lure you. But it has been proven a better source for income. Yes, it is right that it’s a company’s choice to pay or not pay dividends but there is a lower chance in case of a high-quality company to cut dividends.
For both strategies, you need to put your research skills. Find your value stock and open Demat account to hold such stocks for the long term. Demat account opening charges vary financial institution to institution.
Trading Attitude
Following are some of the tips to help you in stock market trading:
- Pick companies, not ticker symbols
Stock picking is not an abstract concept. Buying a stock makes you a part-owner of that company. You must know how a company operates, what’s its place in the industry, how are its competitors doing, its long-term vision and whether it brings strength to your investment portfolio.
Stay ahead of panic time
Most investors are tempted to sell their stocks in a panic instead of sticking to their financial plans. Avoid heat-of-the-moment decisions.
Avoid Over Trading
If you get success in some trades, it does not mean you will experience profitable trades only. Remember that losses are inherent in the stock market.
Build up positions gradually
Do not put all your money in one go or in one trade. Yes, quality is more important than quantity but it doesn’t mean you are ready to lose your money in a single move. Diversification is necessary for the stock market.
Leave your emotion at the door
As it is suggested by experts to your financial plans and trading strategies, you need to keep your greed and fear at bay.
Start with small capital
As a newbie, do not invest large amounts at least in the initial days.
Practice using a demo trading account
Brokers provide demo trading accounts to understand the know-how of online trading. Use that to improve trade accuracy. Bajaj Financial Securities Limited trading account is a low brokerage account which offers up to 99% savings on brokerage for delivery trades.
Stop loss
Apply a stop loss and target price before executing a trade. It will minimize your losses.