Humans enter the stock market intending to earn fruitful results from their capital. The stock market, although has proved profitable to many traders, is not a smooth game with simple rules which certainly leads the player to win it at the end. The stock market is a mix of risks and uncertainties, impulsive decisions, rules and strategies, last moment buying and selling, and much more. The trading history has seen many successes and losses, long term planning, and the quickest last moment decisions.
The rules to a game, the strategies of a business or organization, or the secrets of living a fruitful life are read or heard by almost everyone at some point in their lives. However, they are barely followed either due to ignorance or due to the certain hardships associated with it. The stock market can also be treated as a game and comes with a few rules for a trader to be successful.
Note the below great secrets that can make your trading game the best one.
- Presumptions regarding the returns: Even though the returns that will be earned from the trading are not always certain, still the trader should do the calculation and come to a speculated amount of profit that he may earn at the end of the given tenure. This shall give him an overall picture of how his portfolio looks at a given time.
- Hold on to the promising stocks: The trader should look out for the businesses that are doing great and productive in their areas, and should not get attached to the stocks that are fluctuating without any logic. You should hold on to the stocks that are winning the market and experiencing an increase in the prices consistently, and building the portfolio that remains fruitful throughout the cycle.
- Do not chase the hot stocks: It has become human nature to follow the herd mentality, and run behind the masses. Choosing the stocks that are in the news, that are highly volatile and seem to yield a good return, often turns out to perform exactly the opposite. Keep in mind the performance and non-performance phase of the stocks and try investing in the stocks that have done well consistently over time.
- Invest and own for the long run: You should invest in a trade if you are interested in holding it for many years and not for a short period. “Much success can be attributed to inactivity. Warren Buffet says, “Most investors cannot resist the temptation to constantly buy and sell”. You should avoid the temptation of constantly buying and selling and just sit idly without actually doing anything. The business that you have put your trust in has to perform well and it takes time for doing so. Patiently waiting for that firm to increase production and become more productive will eventually result in the increased price of their stocks benefitting the stockholders.
- Be interested in business performance: It is like buying a different and new business and own it like your own. While buying it, the deciding factors for you should be the products of that company, the history of its stocks, financial capability, credibility and goodwill, its competitors, and everything in between.
- Buy after comparing various stocks: Look for all possible stocks available in the market and then wait for the best price to buy it. The less the price, the more are the chances of getting better profit while selling it. In short, you should first do an in-depth analysis of the prospective stock and then wait for a price that works best for building the portfolio from your precious capital.
- Resource management: For a trader to invest in a company, an understanding of its business is important. And along with that, the focus should be kept on how well that company is utilizing its resources. Its capital, its employees, its workers, its management, its credibility, and many more are really important resources for the company and how it is utilizing them in the best way possible will define its productivity, efficiency, and eventually its stock prices and market position.
Hence, the bottom line is that the above are few secrets of the stock market game, which if followed by the traders, can yield so much for the traders.