One can never be sure about stock market since it is extremely volatile and each day it is a different story and a different direction taken. So, those invested in stock market have to be very cautious and bear in mind that there are few things that will make things easier for them to deal. I am giving a few time tested tips that come in handy while trading in the stock market1,
Invest only when you have extra cash with you . I have known people investing and buying shares with borrowed funds. This is definitely not advisable since you not only may lose the money if you get caught in a downward trend .You may not be able to pay back the money for a long time until the market recovers which means that you are perpetually under stress.2,
Buy shares only after you have made a thorough investigation about the company and its reputation. Never buy unless you are sure, just because someone advised you to do so. Incidentally, business channels on TV that cover the stock market have lively debates and these are good indicators that guide you and help you make up your mind on what stocks to buy or sell if you are already invested in stock market.3,
You need to have loads of patience while tracking stock movements. Share prices are never stagnant and fluctuate at least 1-2% during each trading session. Once you keep track of the movements, you can make small profits by short selling your shares once you have a profit and buying the same shares back if the prices fall on the same day. This is a far more safe method of day trading since there is no risk involved. 4,
Keep a target and see when the target is reached unless you are sure that the prices are going to go further up. Like for instance if the company is looking at new ventures and is on the verge of expanding the price of the stock goes up and it is wiser to hold on and sell when it has peaked out and settled down.5,
Be aware of what is going on in the stock market and your companies. Sometimes there are bonus shares announced by the companies for long time investors and you may lose an opportunity if you make a hasty sale without knowing about it.6,
Many a times you need to think of ways to get out of a negative situation. Averaging out is one such very important step in stock market which helps you reduce your losses to a great extent . For example if you buy 100 shares of a company for Rs 250 each and you see that the stock price is steadily falling for a couple of days reaching Rs 215. Since you know that the fundamentals are good ( otherwise, you will not be invested in that company's shares) you can think of buying more shares at a lower price of 215.If you buy 100 more shares at 215 your average price for 200 shares will be 250+215 = 465/2 =237.50....This way you can keep on adding in small quantities when the prices go down and sell when the prices go up.7,
Never sell in panic. Since you have already decided to invest only that money which you could afford to forget about for the present, you should never sell in a panic going by the market rumors when the share prices fall. In case there are strong rumors about some major upheavals in the company, it is better to consult your stock broker before taking any decision. But under normal circumstances there is always a fluctuation, sometimes a particular upward or downward trend lasting for a few days.8,
A long term investor gains the most in stock market. I can tell you about one stock which has benefitted many long term investors. SAIL or steel authority of India stocks were listed at Rs 4 in the year 1997-1998.Later, in 2005-2006 the share prices were quoting at more than Rs 200. So in effect if you had bought 10,000 shares investing Rs 40,000 in 1998, and sold it in 2006 at Rs 200 per share you would have earned a whopping sum of Rs 20,00,000 , twenty lakhs! Of course after that the stock did plunge and then went up and is now trading in the region of Rs 64-65. This also shows the importance of selling shares at the right time. Don't be too greedy, when you have a good profit sell it immediately because one can never be sure how long the bull run is going to last.
9, When you decide to buy shares make sure that you do it through a registered broker who is connected directly to NSE and BSE. This makes all deals transparent. You can also seek the advice of your stock broker by asking him to send stock market tips each day through mobile so that you know the market trend for the day.
10, Keep an account of all your stock market dealings although these days you get statements and email notifications from SEBI and by your broker. However, keeping a diary and making notes about your own outgo and spending makes it simpler for you since it saves you from going through umpteen statement sheets..
11, Keep all transaction notes and statements sent by the broker neatly filed according to date ,so that you have all records with you when it is needed. You may need it for income tax purposes or for your ready reference in the future. It also advisable to have a separate trading account with a bank ,which you can use exclusively for your share market deals.