Nowadays, you see stock trading advertisements everywhere with great return projections and “success stories”. So it’s pretty understandable that you may feel tempted and start online stock trading without having proper knowledge and may end up losing your investment. So in this article, we will help you learn the secrets to successful online stock trading.
What is Online Stock Trading?
Online stock trading is buying and selling stock of companies listed in Stock Exchanges through an online stock trading platform. Online stock trading has made it easy for traders as there is no need for intermediate brokers or agents. You just need to have a Stock Trading account, and once you create it, you can start trading on stocks.
Six secrets to successful online stock trading
Here’s a list of secrets you need to keep in mind to become a successful trader:
1. Gather Knowledge
There are thousands of stocks that trade on a Stock Exchange. You need to be educated to find the right stock. Gathering knowledge is an essential part of online stock trading. First, learn about the company, study the business line and make your projections. If a particular company is working on electric vehicles, then you should be able to project its future sales. As the whole world is moving towards electric vehicles, you can project that the company will do well in the future. But you must take extra cautions and avoid overvalued stocks that are low quality.
2. Don’t put all your eggs in one basket
The most important rule of online stock trading is diversification. If you put all your money in one stock, you will lose your entire wealth if something happens to the company. So always diversify your portfolio. Distribute your money in good stocks and hold them. If something happens to a particular stock, you will also have other stocks to support your portfolio.
3. Invest on DIPS
There are many good stocks in the market, but you need to find the perfect time for investment. If the stock is trading at a 52-week-high price, then chances are less that you will make a profit from this price range. Stock prices don’t follow a straight line. When a stock price reaches a 52-week-high position, it is likely to fall. So buy a stock when it is trading at a 30-40% discount from the 52-week price range.
4. Preserve your capital
Always try to protect your capital. When you are doing online stock trading, put a stop-loss. It will help you to minimize your loss and preserve your capital. Try to put a stop loss based on your loss-bearing capability. If you can withstand a 10% loss, place a Stop Loss at 10% below your buying price. This will help you protect your portfolio from unexpected falls in stock prices.
5. Be consistent
The best way to invest in the stock market is through systematic investment. Stick to your research and keep on investing in your favorite stocks on every dip. This will help you to build your wealth slowly and systematically. This process also helps you get the best averaging of the stock buying price.
6. Study the market
Nowadays, the economy is linked globally. If there is a war or any economic crisis in any part of the world, it will affect stock prices domestically. Keep a check on global news and be updated regarding the worldwide economic scenarios.
Stock trading has turned out to be the most effective way of growing your wealth. Interest rates in bank FDs are so less that they can’t even fight the yearly inflation rate. So, to preserve your capital, systematically start online stock trading. But, make sure to open a Demat account with a trustworthy stocker broker in India before you take your first step in the stock market.