Irrespective of whether you’re an experienced investor or have recently started exploring the stock markets, your chief aim is to earn a good ROI. How often have you invested in stocks based on your stockbroker’s suggestions only to wait for months, if not years just to break even? No matter how experienced you’re as a trader, dealing with and investing in stocks is more often than not, fraught with unexpected risks, the gains notwithstanding.
Therefore one has to continuously keep in touch with the stock market, study the stock charts, aware of the past trends and foresee the future drifts. Investing in stocks might appear apparently simple and straightforward but could be immensely vexing and complicated in reality. Making money in any type of financial market, be it foreign exchange or bonds do not come easy, and the same also holds for stock markets.
Before you make up your mind to transact in shares, you need to comprehend the stock market, together with its nuances and subtleties.
Effective ways of profiting from your investments in stocks and shares
Be confident about your trading skills and exploit them to the hilt
If you’re sincere in your efforts with regards to understanding the stock market, you’ll surely pick up skills that’ll help you to trade effectively. With passage of time, you’ll be able to fine-tune the skills. You trading skills and acumen will instill in you the sagacity to perceive what you should not do besides what you ought to.
You’ll realize which stocks to short sell and when; when to enter and when to sneak out, and so on. If you persist in studying the stock market, you’ll automatically come to imbibe efficient trading skills which will also boost up your confidence level.
Understand your capacity to invest and plan accordingly
If you’re trading in the US stock markets, you’ll constantly need to maintain a minimum bank balance of $25,000. In case you’re unable to maintain the above stipulated balance, you’ll have to forget about day trading. Your next option is swing trading for which there is no stipulation to hold onto a minimal balance.
Nevertheless, if you want your dealings to be profitable, you’ll at least have to keep aside $10,000 in your account on a consistent basis. A major part of your earnings from transactions will go towards footing fees and commissions if you fail to maintain the minimal balance.
Trade in only high volume stocks to be on the safe side
It does not need to be exaggerated that only stocks that trade in large or high volumes catch the fancy of veteran investors of financiers. That said a stock should have sufficient volumes so that it is worthwhile for trading. According to reliable sources, the minimum or smallest daily trading volume of a stock should be at least 5, 00, 000 shares.
So, if you’re starting out, you should consider dealing with stocks of blue-chip companies to be on the safe side. At the same time, be in the know that blue-chip stocks would require you to invest heavily.
Take advantage of short selling strategy
The short selling technique is exploited extensively by seasoned investors and traders. As per this strategy also known as ‘going short’ or ‘shorting’, you normally sell borrowed securities in the hope that their prices will decline considerably sooner or later. If and when the price subsides substantially, you repurchase or buyback the stocks in order to return them to their original owners.
The idea behind using this strategy is to earn a hefty profit. However, since the market is speculative, prices could also go up significantly, thereby resulting in losses. The possibilities of losing money is greater compared to reaping a profit with regards to short selling.
Consider buying IPOs
As a greenhorn investor, you’ve more to gain (than lose) from investing money in IPOs. IPO stocks are highly sought after as only select shareholders get the opportunity to purchase them. With IPOs, you can adopt a watch-and-wait policy-purchase them only when you feel the pricing is appropriate.
IPOs stand a good chance of performing well, as the newly incorporated public ltd company will want to bolster its goodwill.
Do not put all your eggs in one basket
Volatility is a given with stock markets. Therefore, your long-term endeavor should be to spread your investments as thinly as possible. In other words, you should invest in a wide range of asset classes or securities and maintain a diversified portfolio. A branched out portfolio offers you the leverage to expect best possible returns at minimal risks.
You’d need to constantly update yourself on the happenings in the stock market, and keep informed about the performance of companies whose stocks you’ve bought. The yearly sales, earnings and revenues of a company have a direct bearing on its stocks. If you wish to profit from your dealings in the stock market and keep losses at a minimum, abide by the aforementioned tips.