Every year millions of inexperienced investors try their luck in the stock market casino, and the vast majority of them end up both poorer and wiser for the experience. Most people who don’t succeed have one thing in common: they haven’t mastered the basics. However, you can improve your chances of success by learning them and applying them correctly.
Speculative capital is attracted to global markets like a moth to a flame, with most investors blind to the fundamentals that drive the ups and downs of security prices. Instead of making rational investment decisions, they chase hot tips, make binary bets and sit at the feet of gurus. The best approach is to acquire the knowledge and experience to trade the markets with confidence.
There are some tips and tricks that you can keep up your sleeve to help you invest in stocks. Let us look at some of them.
Table of Contents
- 1. Always Be Informed
- 2. Buy Low, Sell High
- 3. Scalping
- 4. Short Selling
- 5. Identify the Pattern
- 6. Look at the Results
- 7. Look at the Company Name
- 8. Understand the Company Better
- 9. Don’t Trust Mails
- 10. Understand the Corrections
- 11. Hire a Broker Only If Necessary
- 12. Diversify Your Risks
- 13. Money Movement
- 14. Look at the Stock Volume
1. Always Be Informed
You need to be informed about what happens in the market. This is the only way you can trust your decisions. You should go through different resources and publications if you want to obtain more information about the various stocks in the market.
2. Buy Low, Sell High
This is a strategy that most investors will use. It is always good to buy low and sell high, and you must follow this to the tee. It is when you do this that you can expect to make large profits in the market. When you buy low and sell high, you will purchase a stock at its lowest value and sell it at its highest value.
It will be easy for you to determine when the stock price will reach the highest rate based on some methods and data you collect. You need to ensure that you always act according to the data that you have collected. Experts recommend that it is a good idea to buy stocks the minute the market opens. Most stocks reach their highest price in the afternoon, and that is when you should sell them.
3. Scalping
This is a very popular technique in the stock market. When you use this technique, you can always buy and sell stocks within a matter of a few seconds. Your purchases and sales depend on how fast you are. This is a very strange method, but it is very effective, especially in volatile markets. Let us assume that you purchased a stock at 10:00 A.M. and sold it at 10:02 A.M. The price of that stock is $3, and the selling price is $5.
So, in a matter of two minutes, you made a $2 profit per share, and this is a great profit for a scalper. This does not seem like a profit, but if you do this at least twenty or thirty times a day, you can make a huge profit. You should only use this form of trading once you have enough experience in the market. If you want to take up this technique, you should have at least a year’s worth of experience to help you make the right decisions.
4. Short Selling
Many traders use the concept of short selling when they invest in the market. Short selling refers to when you need to borrow stock from the holder and sell it to another buyer. Then, you will wait for the stock price to fall before you give the stocks back to the lender. This is one of the easiest ways in which you can capitalize on the volatility of the prices.
You must make the right decisions about the investments you make and not invest or borrow useless stocks. You must always ensure that you maintain a wide margin that will make a few mistakes. You should ensure that you have enough capital to support any other investments if things never work out. It is always good to buy shares back at the earliest if you believe that the price of the stocks will continue to increase.
5. Identify the Pattern
It is important to remember that stocks and every other stock in the market will follow a pattern. Once you notice this pattern and understand it, you can invest in stocks successfully. This pattern has all the information you need about the high and low points of the stocks and gathers some information on how you can trade between those points. It is important to have the history of the stock with you since it will help you determine the previous trend and predict the future trend of the stock.
6. Look at the Results
Every company is result-oriented, which means that the report published by the company will tell you how well the company is doing. The report that the company shares will shed some light on how well it is doing in the market. You should go through this report to ensure that you are making the right choice. The data collection results should show you that you could make enough profits when you invest in it. A small company will always aim to sell a large volume of stocks, and if you are impressed with the company and its numbers, you can invest in the stocks of that company. Remember that a company only publishes the results quarterly. Therefore, you need to look at all the results before you invest in the company.
7. Look at the Company Name
When choosing to invest in the stock market, you should understand that its name does matter. You must see if the company is well known and is doing well in the market. You can invest in a company that does not have any significant changes. Some people steer clear of such companies. If you are not a fundamentalist and are willing to take on a few risks, you can use technical analysis to help you make the decision. It is always good to learn more about the company if you choose to invest in shares in that company.
8. Understand the Company Better
You need to look at how the stock performs in the market, but it is important to spend some time understanding the company you are investing in. You need to know if the company is working on the right products and services. Understand the industry of the company. See if they are developing new products, technology, or services. Remember that whatever the company does affects the price of the stock.
The best way for you to do this is to learn more about the company through fundamental analysis. You should always read the news about the company too. It is only this way that you can assess how well the company is doing. If you have any knowledge about the company or the products, you should spend some time to see where the company is heading.
When you start looking at a company, you need to ensure that you obtain the information from the right sources. Read this information carefully to understand whether the company is doing well or not. Ensure that the sources you use to obtain this information are reliable. If you get a fax, tip, or email from a person
stating that one company is better than the rest, you need to make sure that you do not rush into investing. Take some time out and read about the company. Never invest in any company simply because of some information you may have received. Always conduct thorough research before you invest in the company. This is the only way you will learn if the company is doing well or not. Never waste your time or money. So, always stick to reliable sources and use that information to invest in the correct stocks.
9. Don’t Trust Mails
You mustn’t trust any emails that come from companies that claim to have enough knowledge about the stocks of other companies. These emails will also suggest the stocks that you should invest in, but the information in those emails is untrue. Companies cannot go through their investors’ portfolios and suggest which stocks they should invest in.
Even if a company does choose to do this, they may give you a suggestion that will not work for you. So, it is good to avoid these stocks and only invest in those stocks that you have all the information about.
10. Understand the Corrections
Remember that the price of stocks will be corrected in the market, and it is important that you remain patient. The price of the stock will drop when the market is correcting the price of the stocks in the market. If you are impatient, you will make a mistake and lose a lot of money.
Always look at the company and make the right decisions about your investments. If a stock is either overpriced or underpriced, it means that the corrections will be made soon. Never sell your stocks in a panic and wait for the corrections to be made. You need to follow the news regularly, so you understand how or why the correction is being made.
11. Hire a Broker Only If Necessary
You should never hire a broker to do the job for you unless you need one. The only reason is that a broker will charge you a fee for helping you with your investments. They will also ask you to pay a commission, which will eat into your profits. You also need to remember that you need to pay your broker a fee regardless of whether you make a profit. So, they do not have to work hard to ensure that you make a profit.
There are theories that companies hire brokers to increase the price of the stock in the market. They request the brokers to motivate investors to trade in a specific stock even if they do not want to invest in that stock. You will purchase these stocks if you can be swayed easily, which will lead to huge losses. You should always look for discounts online and see if you can trade independently. Avoid depending on your broker to buy and sell your stock.
12. Diversify Your Risks
This has been mentioned repeatedly across the guide, so you can imagine how important it is for you to do this. You must always diversify your risks depending on the type of investment you make. This holds for any instrument. When you choose to invest in stocks, try to invest in stocks from different industries and sectors.
If you invest in stocks only in one sector, you will lose a lot of money if the industry were to crash. It is because of this that you need to ensure that you diversify your capital. You must invest in different instruments in the market. Yes, one industry may be doing well compared to other industries, but this does not mean that you put all your money on stocks in that industry.
13. Money Movement
If you notice a sudden change in the price movement and the flow of money in the company, you know that the stock value will increase. If there is a sudden increase in the capital through external sources or it pumped its profits into its business, then it means that the company wants to expand. This will mean that the stock prices will rise, and it will benefit you as an investor. You must always keep track of the news and make the right decisions.
14. Look at the Stock Volume
If you notice that the volume of the stock has suddenly changed in the market, it is always a good idea to invest in that stock. The sudden changes in the price and volume of the stock will happen when there is some information in the news about the stock that makes people buy or sell stocks.
Ensure that you capitalize on these situations so that you can make a huge profit. According to Timothy Sykes, you should always purchase a stock if you experience a high price after one year. The price of the stock will change only when the company talks about its earnings and bonuses.