10 Secrets of Success in Stock Market
- Diversify your investment portfolio intelligently. You can invest a certain portion of your portfolio in other asset classes such as gold, bonds, and cash alternative. So even if one investment fails, the other investment in your portfolio will balance out the loss. Don't put all your eggs in one basket!
- Placing a trailing stop order is another secret of stock market success. Trailing stop is a stop-loss order set at a percentage level below the market price and it is used as a way to protect gains and limit losses.
- Buy stocks when the market signals the start of a bull trend and sell them when the bull trend has ended (A bull trend is a series of rallies where each rally exceeds the highest point of a previous rally).
- A good trading plan is one of the secrets to having the confidence to trade in the stock market. Your trading plan must be realistic and includes all the details such as which markets you will trade, how much profit you want to achieve, and which strategies you will follow.
- Avoid blindly following fads. Following market fads may cause you to purchase an overvalued stock. When everyone starts talking about a particular stock, you are probably too late.
- Monitor the market news and stay up to date on the current events/developments. The world events such as political unrest, crime, changes in oil and energy prices can have a direct impact on the prices of stocks.
- Don't get all your information from a single source! There are so many different sources of advice, from television, radios and newspapers to websites and chat rooms.
- Do not hold too many shares at the same time as this can make it hard for you to monitor the performance of individual company shares.
- Don't purchase unpopular and inactive stocks. Inactive securities are fairly illiquid and trade in very small volume on a daily basis.
- Being well prepared is a secret of success that many people miss out on. It is very important to create a successful trading strategy before any investments have been made.
Top 15 Tips For Successful Stock Trading
- Successful traders analyze stocks by comparing various reports and charts. Using technical analysis and stock charts can give you a better picture of the effect of buying and selling on stock price.
- You should search for reliable stock market news sources to keep you informed of what is going on in the market. Investors can get up-to-the-minute markets news from The Wall Street Journal.
- A successful investor has a lot of patience, common sense and the willingness to research, practice and build up a portfolio that will provide a high enough return to meet personal investment goals.
- Successful traders are goal oriented. Setting a clear goal will increase your chances of achieving that goal.
- Successful traders employ appropriate investment strategies and techniques. Don't use any trading strategy that you don't fully understand.
- You should never invest huge amount of money all at once. It would be wiser to put in the money at various times.
- A successful trader should calculate the risk-reward ratio of a particular trade and try to minimize their risk exposure.
- Before executing a trade, you must make a well-defined trading plan that is realistic, specific, and detailed.
- A successful trader has a strong desire to succeed. A strong determination to succeed can be the one factor that makes all the difference.
- Successful traders are highly disciplined, consistent and rational. Highly effective people will do what needs to be done even if they aren't in the mood
- Understand where you have made errors in the past so as to avoid making the same mistakes.
- Don't be afraid of taking losses. Successful trader takes losses in his stride and tries to understand why the market moved against him.
- Every investor is different and what's good for one isn't necessarily good for another. You must develop an effective strategy that works for you.
- Investing should not be emotional. Find ways to keep your emotions out of buy and sell decisions, and stick to your plan.
- Don't Overtrade! This is a very serious problem and you should learn to avoid it.
Top 20 Investing Mistakes To Avoid
- Putting all your money in one type of investment. If you have all your money tied up in a single investment and something goes wrong, you will lose all your money.
- Another mistake investors make is purchasing stocks before their ex-dividend date and then selling them after the dividend is received. In reality, the company's share price would decline on the ex-dividend date by about the same amount of the dividend, and this has absolutely no value for you. But, the dividends received will create a tax liability for you.
- Focusing on past performance. Investors usually think that the past performance is a good indicator of future performance but ignoring the fact that best performers can also turn into the losers over a period of time. Past performance is no guarantee of future returns.
- Putting too much focus on Number-Based Analysis. Numbers can be used to identify strengths and weaknesses, or to compare various investment alternatives, but numbers alone are not enough in determining an appropriate investing strategy.
- One of the biggest investing mistakes that many people make is investing before they are financially ready. To be a successful trader, you should clear up your debts first before using those funds for investment purpose.
- Being greedy. This is the most common mistake associated with trading stocks. Don’t be in a hurry to make quick money.
- Investing without a plan. It is very important to have a solid plan so that you can be aware of the risks and returns associated with your investment.
- Not setting clear goals. A successful investor should set clear and achievable goals with timelines.
- Not following the financial plan. Some investors simply invest money on other areas without following the initial plan and this may yield higher risks of losing the money.
- Too much diversification. Though portfolio diversification can reduce investment risk, spreading your investment over too many companies will also lead to some problems, you will have too many to properly manage.
- One of the most common mistakes that beginners make is forgetting about expenses or not budgeting enough for certain costs.
- No patience for potential investment growth. Many investors make the big mistakes of selling a valuable stock too quickly.
- Another mistake is to have too much confidence in the ability of your brokers.
- Following rumours without doing your own research and analysis.
- Timing the market is also one of the common mistakes that many investors make.
- Invest in things that you don't understand.
- Letting your emotions rule your decisions.
- Failing to learn from mistakes.
- Focusing only on return.
- Being overconfident.