Is stock trading analogous to gambling?

For many trading and gambling, are same in theory but are practically different. One is calculative risk-taking and another luck or chance game. But both offer unlimited potential for profit or loss.

stock trading

While trading most people have the will to win. Nevertheless only a few have the will to prepare to win. So, here are some stock trading tips for you.

Analyzing data

Trading in the stock market is not a game of dice, it involves, apart from other things introspecting the past data that is available and analyzing it. In gambling, it is an ultimate win or loss, but in trading, nothing is ultimate, neither the win nor the loss. Companies are in constant competition with each other to provide better services and bring in new products for better utility. This leads to a rise in their stock prices which earn better profits for the firm.

Reasoning, rationality, and logic

Traders want to invest in right stocks and hence constantly seek the latest information about the company. To predict market trends they perform technical and fundamental analysis and calculate things mathematically. They apply reasoning, rationality, and logic to come to the conclusion which stocks to buy and which to sell. Investors on the other hand judge past trades and then plan their strategy. Where to invest, amount to be invested, and for how long should they hold. Gambling is totally different game altogether.

Entering and exiting market

All trades are first carefully analyzed before buying and selling. Traders know at what level they will enter the market and exit before initiating any trade. They follow the strategy that they have made and are disciplined in it. Everyone knows that the market is unpredictable and the wise investor goes in a planned manner rather than playing with odds. It is due to his discipline and patience that he made a good profit. Trading is not winning the one-time jackpot but it can be a regular source of income.

Calculating before buying/selling

Before trading one should know that he/she cannot win each and every trade. Whenever one trades he should have a long-term approach. Before investing the trader should gain as much knowledge about the company as possible. Blindly buying stocks without calculations and analysis is like betting at the poker game without looking at your cards.

Effects of environment

In gambling no outside events affect the outcome, in stocks outside events like a good/bad monsoon, change of political power, change in government rules/regulations, strike etc. affect market movements.

Planning and learning

In gambling, there is a get-rich-quick perspective which is not suitable in the stock market. Traders look for a plan that provides for a learning experience which in due course leads to success. A trader gains experience even when he loses and using this experience he can gain better profits in the future, nothing like this in gambling.

Risk can be managed

In trading, you can incorporate risk management techniques to reduce loss. Risk cannot be managed in gambling, you win or you lose as simple as that. No need for technical and fundamental analysis in gambling.

We perform technical and fundamentals analysis of the company before providing you with any tips or suggestions. We also study other parameters like political climate, change in government rules or regulations, weather conditions (rainfall), inventions or discovery, etc. before coming to any conclusion to buy/sell the shares.

How to make profitable stock trading strategy?

It is the goal of every stock trader and investor to formulate his own profitable stock trading strategy. Being a serious trader you might have many different trading strategies for different market conditions. You might have also noticed that there is a regular uptrend or downtrend for a certain period of time. Many a time it can move sideways too. One has to implement a proper strategy to make money.

trading strategy

The market constantly changes its behavior pattern and hence your strategy should evolve accordingly.

Your system should define rules set according to market trends, present and the future situation, regarding which the best trading strategy you should use. You can be a day trader and may prefer swing trades or positional trades.

Questions you should answer before preparing a strategy

Basically, your marketing strategy should be able to answer two important questions. First, how to find the best pick for your strategy and secondly how will you trade. Answers to these two questions will be the description of your trading strategy.

On alliance research you will find almost everything you need to trade for your strategies.

Finding stocks to trade

One should use technical and fundamental analysis to find the stock you wish to trade. First, you can use the screener to make automatic pre-selection. Secondly, once you are done with your selection you can fine-tune your selection using individual chart analysis or some other screener. Screen strategy sector wise, industry wise, with both fundamental and technical analysis. Thirdly create a trade setup for the best opportunity you find.

Testing your strategies

Once the strategy is formulated you should test all your strategies before you use it on your trading account. There are various different options available to test your strategy. One can use back-testing tool to back test automatically. You can use paper trades using the MS Excel spread sheet or use paper and pen to note your trades.

Moving on to the next step

Once your strategies start showing positive results you can follow real-time strategy testing with a small amount of money. You can start with 100 – 200 shares to test your strategy in real time. You can see that if your results are nearly similar to your virtual trading.

If trading with small amounts is satisfactory, well you can integrate such strategy into your trading account.

Money management

Money is an integral part of your trading hence its management for every single strategy is a must. The rules can be common for your overall trading system or they can be adjusted for each strategy that you make.

For money management, you should know answers to how much is your risk appetite for every position in your portfolio, how many open trades one can have at any given time, and what will be reward and risk ratio. Your money management strategy will help you to arrive on a figure how many shares are to be bought in a single trade. This way you will able to manage your risk as well as your money.

One should trade only in liquid stocks. These were some stock trading strategies that you can employ and use for profitable trades. For further details, you can contact us.

Trading tips to secure better returns

Many a time people buy stocks on their friends or relatives recommendation to make quick money and wait for days or sometimes months, just to recover the cost. Those who are in share market term trading as a risky game but if one it plays smartly he can earn enough money.

profit

Many investors enter in stock market thinking they will make a lot of money and that too in a very short time. But as everyone knows there are no free lunches. Trading is a game which requires forming the strategy with a disciplined approach.

Many traders make money and many lose money too and you should know if trading activities suit you or not depending on your financial position.

Even when one gets trading tips, its execution is important. It is said trading is simple, but not easy. One has to be disciplined in his approach.

Discipline in trading cannot be overstressed. In most cases when people are making money, it is their greed for more that makes them wait instead of booking profits. When the market takes downturn it is fear that makes them sell fast. These circumstances can be avoided if you know when to book profit/loss. We have discussed a few trading habits and skills that will help you stay on the right track.

Discipline – While entering the trade one should be clear on the stop-loss value of the share, and follow it in a disciplined manner. Depending on the volatility of the share one can keep the stop loss at 5 or 10 percent.

Skills – While trading one should know what to do and what not to do. Trading is basically a skill to know when to get in (enter) and when to get out (exit) trades.

Planning – Proper planning is a must. One should concentrate only on few stocks and plan at what value one has to buy, decide a stop loss, and at what value one should sell.

Capital – For a meaningful trade one should have sufficient capital to invest in stocks. The capital that one invests should be owned and not the borrowed one. Though traders can trade with less capital but volumes and return also count. Minimum capital should be INR 3 to 5 lakhs.

Price range – One should prefer shares the difference on which in an intraday high – low should be INR 10. It is not useful buying shares which has high volumes and not much price movements.

Timings – With reference to Indian context the best time to trade is 9:30 to 11:30. It is observed that during this time, the market is most volatile.

Supply and demand – The value of stock changes with the supply and demand of the individual stocks. If the number of shares up for sale is more than one should not buy the stock and vice versa. To know if the sell quantity is more or buy quantity is more one can identify by performing a technical analysis of each individual share company.

News – Never trade on news that is out in the market. A stock price adjusts to the news within few minutes and later on, they return to their normal.

Charts – There are technical charts and fundamental analysis which should be studied minutely. It gives out many clues regarding the direction of the market.

If you wish to trade and want tips regarding how most probably the market will behave, you can contact us.

How can you earn money from Indian share market?

Many people start stock trading to make good money. However equity trading is not easy for all, despite it, many investors have made a good profit in stock trading. There are some basic principles of trading like one must have discipline, patience, market understanding and research ability.

Indian share market

Indian stock market is quite volatile. This creates confusion among investors regarding their decision to hold or sell stocks. Therefore, there is no tested or proved the formula that can help to achieve desirable success in the share market. However, there are some trading rules that can help to increase chances of success during trading.

1. Follow disciplined approach 

If you study the history of the Indian stock market then will find one thing that whenever the stock market goes up suddenly it creates some panic moments for investors. A big number of investors had lost their money when the Indian stock market had a bullish trend. It happened due to the volatile nature of the stock market. On the other hand, some investors who had followed a disciplined approach earned good money. Therefore if you have a long-term trading plan then should use a systematic disciplined approach.

2. Control your emotions

There are numerous investors who have lost their money because they did not control emotions during share trading. Investors invest in share market to make good profit and greed of this they invest in wrong shares. Greed and fear are two factors associated with emotions and these must be controlled during stock trading.

3. Trade with surplus funds

Some investors take the loan and invest in the stock market in the belief that it will return good money that is wrong. The stock market is full pack with up and down. You should not test your skills or luck with debt money. If you are a newcomer in the stock market then it is advised that you should use your surplus money for trading. If you start making the profit then use the same amount to buy other shares.

4. Set realistic goals

Most of the investors set earning goals for invested money. You also can set financial or profit goals during trading but it must be realistic. There is no guarantee that you will get the same return each time. Therefore you must set achievable and realistic financial goals.

5. Avoid herd mentality

Many traders follow herd mentality means they buy or sell a specific share if most of the traders are buying or selling. In such way, they try to go behind majority without their own research. You should avoid such mentality because it will not work in long run. You should do your own research and follow self-trading strategies.

The stock market is one of the best ways to get the good return of invested money but here also you will have to follow some basic rules. If you follow these then can stay in the stock market for a long time because profit and loss are two faces of trading in the Indian share market.

Many investors have been made the good profit, you also can but will have to keep patience and avoid greed during trading.

How to choose a better stock option for investment?

Share market is considered one of the best options to increase investment in a short period of time. However, it is good if you are ready to take the risk with your invested money because here profit and loss both exist. Either you are a beginner stock trader or having experience of few years, you should focus on choosing the best or a better option to get back more value of your investment.

stock option for investment

Each company listed in the stock market promises to return huge amount than invested but investors have limited money to invest. He cannot buy stocks of all companies, therefore, research-based selection of stocks and an adequate comparison is compulsory before buying stock.

Here we have discussed a few rules that will help you to choose the best stock option.

First Rule: You should invest in easily understandable business model companies. It will help you to predict the company’s future because its business model is simple and a common man easily can understand it. You also can select those companies which have a sustainable business; generally, such companies are considered trusted investment option in the share market.

Second Rule: In stock trading, a famous saying is “past performance is not a guarantee of future performance”. However, it is not true when you choose stocks to buy. As a company’s past track record helps to predict its future growth. Therefore before buying stock of any company you should do adequate research about past business growth of the company.

Third Rule: Some companies give a high dividend to their shareholders while some give very poor. You should go to companies which distribute rich dividends. You should give preference to rich dividends companies in your investment portfolio.

Fourth Rule: Diversify your investment portfolio. It means you should pick stocks from different industries and different fields. If any news, government rule or any other outer things affect the stock of any specific industry in such cases other stocks of your portfolio can manage the loss of those shares.

Fifth Rule: Always said choose “Best in Breed”, it applies in stock choosing also. There are numerous companies in different segment and industry but some companies are considered as “best in breed”. You should choose such companies. The stock of such companies gives high return and shareholders trust on their business model.

Sixth Rule: The most common share trading strategy is “Buying when the price is low and sell when the price is high”. However, you should go beyond it and buy stocks of new growing companies. Most of the experts suggest that buying shares of new and growing companies at an early stage is a guarantee of high return on long-term. You can go for it if looking for better stock options for long-term investment.

In the stock market, a number of techniques and strategies are used to choose the best and profitable stock option to gain a high return on invested money. One strategy may work for one but there is no guarantee that the same strategy will work for you as well.

Therefore you must be more conscious to follow anyone.