Stock trading these days has become popular unlike few decades back when it was only used by the rich. People want to make returns from their money besides their salary or profits from their business. Even with the popularity, many do not understand the basics and how to go about trading.
Below are few tips for beginners.
- Invest available money: Always use the money that you have in spare or that has been kept aside for investment. Think of how losing this money can affect you before you invest.
- Educate yourself: If you plan to trade by yourself even if it is through an agency, it is very important that you understand the basics of the stock market. You need to also develop the habit of reading the everyday news as it majorly influences the market swing.
- Build a Portfolio: Your portfolio must have your investment plan, savings details, risk margins and your investment goals. If you choose stock market as your investment mode, then you will have to revisit your risk margin as compared to other investment plans it is more volatile.
- Setting up an account: It is very easy to set up a trading account. You can choose any one of the numerous stock broking agencies and start a trading account with them.
- Reduce frequent transactions: Beginners tend to buy and sell stocks a lot increasing the number of transactions per day. This could be to earn short profits or they listen to other sources of information on stocks like the news channel. Only your stock broking agency will gain from this as they charge you for each transaction and this may null all the profits that you had made from the transactions.
- Keep away from stock market scams: Keeping your money safe from scammers is also important. Promises of 50% return and higher profits are usually the tagline that people use to cheat investors.
- Protect your money using Limit Order: Even after analyzing the stock, its movement is still unpredictable due to the market fluctuations. Using Limit order will help buy stocks at lowest (while buying) and sell stocks at highest (while selling). Using Limit Order to buy .5 to 1% below the current price and .5 to 1% above current price for selling will save your money and provide profits.
- Spilt your money: Do not invest all your money in one company. Spilt it across various companies and sectors. Even if one fails, gains from the others will overhaul failure from one.
- Increase your investment and save profits: Unless you are looking for small monthly returns, invest your profits for greater returns. You can do this once you are confident of your judgments and have made some significant money. It is also necessary that you move your profits to your bank account
- Set up Dividend Reinvestment Programs (DRIPs): DRIPs invest the company dividends into buying additional shares. Over a period of time, you will own a significant amount of shares of the company.