How to control investment loss in share market?

Everyone knows that investing is buying shares at the low price and selling it at the high price. But everyone forgets that it is not possible consistently, and practically not possible to time the market.

How to control investment loss in share market

Emotions sway our judgments, and we cannot take losses easily. Losses not only bring us financially down but also hurt our egos. Though every time we sell our stocks which have appreciated in value and book profit, but whenever the stocks dive we hold on to it thinking that it will appreciate sufficiently and we will not incur any loss (and neither profit), this way we wait and then come to know that our returns are not even the fraction of our purchase value. You can see there are many benefits of intraday trade

This situation can be virtually avoided or loss impact can be lessened. The best way is to trade in a disciplined way and adopt profit/loss plan. We will discuss a strategy of this profit/loss plan.

  1. Introduction to profit/loss plan

Profit/loss plan is overlooked by most of the investors and day traders. It sets the upper gain limit and lower loss limit. In other words, the upper limit is maximum gain and the lower limit is the maximum loss (usually called stop loss) an investor can withstand. Limiting the losses is a very important part for an investor which has an effect on overall portfolio and hence this plan is one of a crucial part while making a sound investment strategy.

Everyone (including professional investors) make mistake while picking up a stock and lose money. But experienced investors have the ability to recognize their mistake, and learn from their mistake, for their future stock picking.

Profit/loss plan helps you to separate your emotions from your investing strategy, once you recognized your mistake. If you are not too possessive (emotional) of your gains and see to it as increasing your cash flow you will not be sad of your losses and therefore you can control them. A proverb in this context goes like this “be neither proud of your success nor sad of your defeat”.

  1. Planning your profit/loss plan

First and the foremost thing one should set a limit of maximum gain, and maximum loss that you can withstand for your investment. This maximum and the minimum limit will vary from stock to stock. Say for large caps (which are less volatile) it can be 10 percent (gain and loss) in a year, and for small caps, you can keep 20 – 25 percent gain and 10 percent loss limit. Similarly, you can limit for mid caps too. Each stock should be analyzed on an individual basis. Go through Indian stock market overview to know what range is large, mid and small caps are.

You can use fundamental or technical or both analyses to determine the upper and lower limits.

One can also take into account the designated performance benchmark for each stock by going through their past performance or index. Your risk tolerance factor should also be taken into account while devising the plan. Are you risk averse or risk lover? Accordingly, you set your loss limit.

  1. Plan Execution

Once you have decided on your gain and loss limits, you have to put your plan into action. Remember you have to sell your stock once it has reached upper or lower limit. A double requirement. Certain brokers will not take two different sell orders for the same script. So the best thing is to trigger sale order once it reaches your stop loss threshold. This ensures that you do not burn a large hole in your pocket. Now if the price appreciates to the upper limit, just change the price of your stop loss order, which in turn activate immediate sale of your stock.

Try to stick to your proposed plan. You will get a heartache that once you sell your stock at the upper limit and share prices keep increasing, but it will be better to sell stock on their way up than to wait and dump stock when the price collapse after its peak. This is a way to make money in Indian stock market.

 

How to choose the right stock broker?

For investments in stocks, one should have broking account. This can be opened at any brokerage house. Hence one should take almost care with whom you are opening your account with. This impacts your overall returns, ease of doing business with and increasing your wealth in long run through proper guidance and research.

How to choose the right stock broker

There are two types of brokers

 

A) Full service – They provide a variety of services like buying, selling, IPO investments, demat account opening, research, advice on market trends, retirement planning, tax planning etc. They charge brokerage as a percentage of trade value and are bit expensive compared to discount brokers.

 

B) Discount – They provide basic necessary facility services like buying and selling. They charge brokerage on basis of per trade and are cheaper compared to full-service brokers.

 

Before hiring services of any type of brokers, you have to decide how often you will trade. If you are investor and trade very rarely than take services of the full-service broker but if you trade very frequently than better go for a discount broker.

 

Before finalizing any broker there are certain points you should analyze. One should also have Indian stock market overview before analyzing the broker.

 

  1. Stockbroker reputation

If the stockbroker is highly experienced and has up to date knowledge of present market trends and inner working, you will be saving quite a few bucks in a long run. To list these types of brokers you can go through official website of SEBI and few stock investment websites. One must also see any issues of complaints or check on their reputation from personal experience of other investors in the market who are/were in contact with the stockbroker.

 

  1. Brokerage fee

Fees like the commission, account opening, transaction, maintenance, transferring money, etc should be taken into account and should be compared with other brokers along with services in each category provided. These fees are associated while working with the broker. For few transactions per month/year, one should opt for brokers who have low maintenance fee and for very frequent transaction per day/month one should opt for a low transaction fee. These fees will impact your overall returns.

 

  1. Technology and software tools

Brokerage firms are increasing capacity and speed by using advanced technology. They are also using these technology models and developing such software tools for market research which gives them more and more perfect trends and up to date information on market conditions to take better and reliable decisions. Choosing these types of brokers to help you make an informed decision and because of speed, real-time executing of your trade will be possible (especially for day traders).

 

  1. Your investing type

If you are a day trader, where your trading volume will be high, a flat fee on transactions which are low should be preferred. Better choose discount brokers.

If you are an investor, who holds his script for a considerable period of time, low maintenance fee brokers should be preferred. Better choose full-service brokers.

 

  1. Local office

If you prefer to talk to an advisor, face to face or on phone for buying/selling your script see to it that brokerage firm has an office or a franchise in your city/town. But if you are comfortable with doing things on your own then local office or franchise does not matter.  Certain brokers have online facilities can be used from anywhere in India.

Do You Know How Equity Market Tips Can Help You?

The world is shrinking because of numerous communication channels that are available like internet, radio, TV, mobiles etc. , distances are becoming shorter, news and information are exchanged within a short span of time over a large distance.

Do You Know How Equity Market Tips Can Help You

Indian markets are assessable to the world and world markets are assessable to India. In short, all markets have become the global marketplace and goods, technology, services, capital, and trades are changing hands at a very fast rate across the borders of countries.

Indian stock market is gaining popularity worldwide because of its huge market size, growth, momentum and stable economic condition. Other markets like American, Japanese, European etc., have the effect on Indian markets and vice versa.

After opening our doors to the world in 1991, Indian markets have seen tremendous growth and foreign investments are regularly growing through foreign direct investment and foreign institutional investment.

It is seen that very less percentage of Indians population are able to cash on the booming equity market because of fear of bubble getting busted any time and volatility of the world market conditions.

People fail to recognize that this is the best time to make good returns on their investments and even day traders can cover up all their previous losses. Because of lack of time or because of lack of required fundamental and technical knowledge or not knowing how much risk can they can take, less information on ways of working with the market are certain things that keep general public away from stock market.

Alliance Research is a professionally run company and understands the complexities the trader’s faces and hence has come out with few services in equity segment.

  1. Stock cash – It is a low-risk type, where 2-3 stock cash calls are provided daily and complimentary 2 – 3 calls are provided on monthly basis. It is for those intraday traders who can invest amount less than Rs 50,000/- in the stock market.
  2. Stock cash PDP – It is a moderate risk type, a premium service, where 4 – 6 stock cash calls are provided on daily basis and complimentary 1 – 2 calls are provided on monthly basis. It is for those intraday traders who can invest amount Rs 1, 50,000/- or more in the stock market.
  3. HNI cash – It is a high-risk type, for high net worth individuals, 2-3 premium intraday cash market calls are provided daily and 2 – 3 premium positional cash calls per month are provided. Utmost care is taken in deciding on the level of calls execution and profit booking.
  4. Overnight cash express – It is a moderate risk type, 1 – 2 calls are provided on daily basis with the prospect of next trading day to optimize more profit, 15 – 20 calls per month for overnight holding. Calls providing time is 40 to 60 minutes before market closing. This is one of the premium services hence free trial on this service is not given.

Best 5 proven commodity trading tips for beginners

When talking of exchange, stock exchange comes first to everyone’s mind. Place where securities (shares, bonds etc.) are traded.

 

But very few know that commodity exchanges (though in a crude form) existed much before stock markets came into existence. People traded in rare seashells, animals, precious metals, precious stones, pearls, cocoa, soya beans, spices and later on in oil, energy, electronic and electrical equipment, machinery, pharmaceuticals, chemicals, and what not.

commodity trading

Share market deals, more or less with companies producing finished goods, commodity market deals with raw material used to make other products. It can be agricultural like wheat, soya beans, tea, coffee, corn, cotton, sugar etc, can be metals like gold, silver, platinum, palladium, lead, zinc, tin aluminum etc, can be energy like crude oil, natural gas, propane, heating oil, etc. can be livestock and meat like live cattle lean hogs, pork etc, others products are rubber, wool, amber, etc.

 

Every country has its own measurement criterion and different qualities. So things have to be standardized for smooth exchange of business. In a commodity exchange, the unit of trading is a metric ton, bales, bushels, the barrel of oil, troy ounce, kilogram etc and quantity of each commodity is also defined. Currency is mostly US Dollars.

There are many commodities exchanges in the world. Some have merged and some were unable to continue their business. There are few commodities exchanges that deal in few selected commodities, whereas others deal only in one group of a commodity.

Few known commodity exchanges in India are ICEX (Energy, Precious Metals, Base Metals, Agricultural), MCX (Precious Metals, Base Metals, Energy, Agricultural), NCDEX  (Agricultural , Precious Metals, Base Metals, Energy,),  NMCE (Precious Metals, Base Metals, Agricultural), COC (Agricultural), ACE (Agricultural), BOOE (Agricultural), UCX (Agricultural), and  NSEL.

Bases of trading in commodity market.

  1. Investment amount – It should be very clear that commodity trading is a risky business. One can multiply his wealth several times and may also wash out his capital with huge debts. Hence one should be very sure of the amount he is investing (usually 10% of your portfolio)
  2. Brokerage account – You will have to open the brokerage account with any of the brokering firms which deal with the trading of the commodity. You will have to deposit amount in proportion to your trading. Since trading in certain commodities, you have to deposit huge amount because of the minimum trading size of the lot.
  3. Types of commodities you wish to trade – From the above-given commodities you will have to select which types of the commodity you wish to trade in, like agricultural, precious metals, base metals, energy etc.
  4. Portfolio diversification – To reduce the risk it is better to diversify your portfolio holding. Say if agriculture is your portfolio you can diversify into wheat, cotton, sugar etc, as our country’s agriculture and crop pattern are based on monsoon, it is seen that monsoon pattern is very uneven in different parts of the country. So for some commodity, there will be an abundance of stock which in turn will be least profitable and vice versa. One should rebalance his portfolio from time to time especially depending on monsoon conditions during that year.
  5. Other methods – One also can go in for shares of companies which deal in the commodity. But bear in mind that these commodities-related shares will not be in complete relation to rising or fall of the commodity prices over a period of short time. But they will, however, reduce your risk as they will be managed by experts in the commodity field.

How to make a winning trading plan in just 11 steps?

Traders should make a virtually full proof plan before entering a trade. “Fail to plan and you plan to fail” goes the old dictum. If you scan through all successful traders you will see a common thread. They have a plan ready for the day. And in some cases even plan “B”, for minor changes, if plan “A” is steering out of the way. So you either follow your written plan systematically or perish.

Only minorities of traders have a written plan and that minority is successful ones. By writing down the process and documenting it you can easily figure out what steps work in your favor and which do not. You can avoid costly mistakes in future.

winning trading plan

Let us see few salient features of the plan in the context of Indian stock market overview of trading.

  1. Testing yourself

After making a plan you can test how successful and effective your plan is by paper trading. You can judge your strong and weak points. In trading when someone wins there is someone who has lost. Those with plans make the profit from those who lose because they were not prepared any plan. It is give and take in trading.

  1. Be calm and cool

One should be cool, calm and composed. Should be ready to face challenges the market has to offer. There is a saying “Do not promise something when happy and do not make decisions when sad.” This holds true for trading. Because if you are mentally somewhere else and physically somewhere else, then you will not be able to take a proper decision and right direction of your planning. There is always an another day. There are many benefits of intraday trading.

  1. Risk tolerance

Everyone has a certain capacity to take a risk. It varies depending on person to person and time to time. Maybe today your tolerance level is 1% risk of loss (in a day trade) and maybe at other time periods, you may be in a position to take 3% risk of loss. If during any time during trading you feel like things going against you in a sequence you can call it a day off at that movement itself.

  1. Risk/reward ratio

One should have a realistic target for profits to be earned for the day. You can set your risk/reward ratio. Say you can risk losing Re. 1 if a reward is Rs. 3. This target you can set for daily trade or you can consolidate for weekly basis or monthly basis. One should regularly monitor these and make required changes if you are moving away from your target.

  1. Follow related news religiously

One should scan news regularly and religiously the before the market opens. Keeping oneself updated. Write down those important piece of information like business news, articles, an outcome of some important meeting, changes or variation in government policies, the trend of other stock exchanges, business-related economic reports.

One can scan news through the newspaper, morning news on TV on different channels, through the internet, etc. And later in the day can analysis which all news has affected today’s stock market, and which companies were most affected. Professional traders work on probability. More the probability of happening of an event, more accurate will be the trading decision and direction. There are many people who make money in Indian stock market over a long period of time.

  1. Clear warning system

One should keep a tab on the support (minor and major) and resistance levels. Whatever be the system or program you follow, you should set an alarm for warning when the required level is breached. An alarm can be a buzzer or be flashing signal clearly visible without any disruption or distraction. Overlooking it can be a costly affair.

  1. Upper and lower limit

Most traders maximize their attention and effort towards buy signals and are least bothered about when and where to exit that trade. They keep on holding onto the script even if it is going down as they do not want to take a loss. If you cannot overcome your ego for taking the loss then you will never become a good trader.

In other words, if the script is going down it means you have miscalculated something somewhere and were wrong. Even seasoned traders have their share of losing trades, but by managing your invested amount and limiting losses, they make the profit.

Traders should know when to exit the trade. They should write down both the ends of each script. The lower limit being stop loss and the upper limit the profit target they wish to earn. Once your script touches any of these levels, just exit.

  1. Computer programmed to buy automatically

Let us say we wish to buy certain script at Rs.100. And presently it is trading above Rs. 100, say 103 or 105. One can program the computer in such a way that it triggers a signal once the script reaches Rs. 100 and call for buy. Minimum target should be at least 3 times the stop loss and it buys the script automatically, once the required conditions are met.

  1. Recording minute details

It is one of the most important aspects of good traders. Good traders keep a minute account of each trade they made. Be it profit or loss. All detailed description of essential features like target prices one has set, stop loss one has set, entry and exit price, support and resistance level, time of purchase and sell, market opening and closing points, and all useful comments,  news and lessons learned.

This will act as a quick reference guide in future. It will save you lot of time and energy for identifying what went wrong and what was right for your future trades.

  1. Careful and detailed analysis of the day

After the close of the day, one should do thoroughly analysis of the day trading. Writing down conclusions and analysis of the day with as many details as possible. This will help you know where you are going wrong and you can minimize your wrong decisions in future trades. It will improve your trading skills. By this way, you can avoid share buying and selling mistakes.

  1. Trading is a bread earner for you and your family

As any other businesses, you should treat trading as a business and give your due respect. After all, it gives you and your family bread and butter, and keeps you financially healthy in long run. Each trader has his personal trading methodology, style and goals. So he himself will have to prepare his plan.

Best Indian Stock Market Tips For Beginners

Money lures one and all. Big and easy money lures more and more people like a Pied Piper. This lure of big money brings people to the stock market. But let me clarify you must be aware about Indian stock market overview to make money.

Many people have lost their entire life savings and are debt-ridden. Their greed has brought them on the verge of or have committed suicide. The other side of the coin is that few have made good money too.

Indian Stock Market

Let’s see the others few who have made good money, who had patience, done a lot of research, solid understanding of the market, and had disciplined way of trading.

Market volatility is one of its inbuilt characteristics. New investors are in a state of confusion during this volatility period, should they hold, sell or buy the shares.

Market swings (up or down) are impossible to predict. But there are some rules and cycles if followed, then probabilities of good returns are high.

 

  1. Surplus funds.

One should only use surplus funds that one has and it should not create an unbearable financial loss if in case he loses, fully or partially that amount in share market. In present market condition though chances of losing are very less because huge data is available on the internet to satisfy one’s analysis. But still, there are chances ( the risk factor associated). Best thing is to invest 10% of your surplus funds regularly and whenever gain is made, book profit over a period of time.

  1. Diversification.

One should diversify his investments (spreading risk) by investing in small-caps, mid-caps, and large-cap companies. Every segment has different returns and volatility. One can also diversify on bases of sectors (bank, IT, metal, pharma, FMCG,) as some sectors perform better due to favorable government policies or announcement. One can diversify on basis of thematic indices (commodities, energy, MNC, PSU).

Diversifying investment in different ways helps to reduce the risk factor of your investment. But too much diversifying can have a bad effect on your returns as they will go out of control. You will not be able to take proper advantage.

  1. Expectations.

Multi-bagger stocks are those stocks which have given unimaginable returns over a long period of time. There are tens of thousands of shares. Out of which only a handful have given unimaginable returns. And also only in the bull phase of the market. It is very very difficult to figure out which “unknown” stocks will give these type of returns.

We always hope that the stocks we have give the best returns, but practically it is not so. We should not have unrealistic returns of any stock. One should know at the maximum how much return our stock will give in future, say few years down the line. Warren Buffett said that one can expect 12 percent returns. Above it is just luck. If your expectation is more than that, one is just inviting trouble. One cannot be lucky each and every time.

  1. Known business.

It is better to invest in a company whose business you understand and have knowledge about, like transportation, textiles, automobiles, paper, electronics etc. In this way, you can figure out how much return you can expect the business can give practically.

  1. Keep the tab on news.

World news does affect our stock market (in a positive and negative way). And ultimately our share prices move up and down. One should always track Indian and world news regarding what is happening in different parts of the world. Change in government policies, rules, an outcome of meetings held, mergers and acquisitions, company announcements, financial results and business related news on regular basis. This will help you in knowing which shares to purchase and sell.

How to minimize your share trading risk?

We can define risk as the possibility of loss or a situation which involves such a possibility. Risk and rewards, in other words, means how much is the risk that we can take against the rewards we will possibly get.

We all know that while trading in the stock market we are taking risk of our money when we are buying/selling shares of any company. We may lose some or most part of our money (if stock prices go south) or we may profit (if stock prices go north). There are many examples that people have lost huge amount and have committed suicide and also have gained huge amount and are leading a luxurious life. A tale of rags to riches and also a tale of riches to rags.

minimize share trading risk

We can control our risk if we play it in a calculated manner.  Along with evaluating pros and cons of a company whose shares we purchase and along with calculating ratios and analyzing trends with facts and figures we should also apply common sense tricks or tips. Usually, successful traders are those who win more number of chances than losing. One has to manage his risk so that he wins more than he loses.

There are certain principals or rules if applied properly and diligently can manage risk more properly. Tilling the scales more towards winning side.

  1. Begin with a small amount. It is better to begin trading with a small amount. It is an amount which you lose will not make any dent in your financial life. In other words one should start trading with a small amount of the total capital one is ready to invest in future. We can call it a rehearsal or trailer of a three-hour film. One should start in such a way that one can bear initial few losses in a row. It is said man proposes and God disposes. So it is not that every thing will go exactly according to your plans. Your risk amount should not be more than 5 percent of your capital invested in a single particular trade.
  1. Always use a stop loss. Always use stop loss as soon as you purchase a share. It helps in minimizing your losses. Say you purchased a certain share at Rs. 100/- and are holding for certain period of time. You can order stop loss at Rs. 90/- (10 % SL). If share prices decrease from 100 to 95 to 90. Once they reach Rs. 90/- you better sell it (taking 10 % as your loss). If your appetite for risk is higher you can go in for 15% SL. It is not wise decision to undertake uncomfortably large risk, especially in the initial stages. It is better not to trade in futures and options as fall in prices can be 15 to 20 percent within a matter of few hours.
  1. Exit script upon mistake. Everyone makes mistakes. So once you realize that you have made a mistake while purchasing a script, it is better that you exit that script as soon as possible. It is not possible to manage your loss. If you think you can manage your loss you will fall more in the loss trap trying to cover your previous loss. If you are using margin money for trading then losses and gain will both be exponential. During loss better not to wait for margin call, and quit.
  1. En-cash bad trades. Certain laggards remain to be laggards no matter what. Good performers do have their bad times or setback but they recover from their set back faster. Once you plan to sell off your bad trades see to it that you sell those shares first which have not performed well for a considerable period of time.
  1. Sometimes cash is better. Usually, when the market is having free fall it is better not to stay traded. Cash in hand is a position one should take if a market is continuously having a downward trend. Once downward trend stabilizes start your purchase. Better to have cash in hand than to lose by trading.

What Is Buy Today And Sell Tomorrow (BTST)? – Step By Step Guide

BTST that is buy today sell tomorrow and also STBT that is sell today buy tomorrow. Traders who wish to make a good profit from the closing of the market today and the opening of the market the next day. In local parlance, it is called gape up or gape down. Both BTST and STBT work in tandem.

 

buy today sell tomorrow

Let’s go in detail. Share prices move up and down. But sometimes it so happens that between these sharp turns no trading takes place. In other words closing of trade on a day and opening of trade on next day. In between no trading takes place.

These gaps are created by some positive/negative news announcement by the company, or buying/selling pressure or sudden rumors in the market usually after closing bell. If favorable then next day opening is on high (much higher than the previous close) and if news or financial statement is unfavorable then next day opening of the script will be low (much lower than the previous close).

Let’s take an example. Today at closing an XYZ stock is at Rs.50/- Due to some good news (usually after trading hours) the next day opening of XYZ stock will be Rs.53/- Notice the gap. Another ABC stock at trade session closing is Rs.75/- Some bad news and next day it opens at Rs. 72/- Again notice the gap. Smart traders use this gap to make a quick profit, from price correction off course, until new price equilibrium comes in place. But if some economical announcement by government or banks is made during trading session one can find the gap there also. One of the good characteristics is one can earn quick profits with minimum risk.

These gaps are created by some positive/negative news announcement by the company, or buying/selling pressure or sudden rumors in the market. If favorable then they open on high and if news or financial statement is unfavorable then next day opening of the script will be low.

Usually, minimum investment amount required is 1.5 lacs to 2 lacs or 2 lots and the person benefits by around 3000 to 4000 per lot per call. Usually, 3 to 5 calls are made per week and 15 to 20 calls per month for T+1. Or overnight holding. Calls are usually provided through SMS and chat room. And reports are provided on weekly basis. Usually, calls are given for stock future but sometimes options is also considered.

Usually, if a trader be it cash or margin finds profit on trading of not much then to increase his profitability and get better returns they can use BTST/STBT can use one or two days more so as to get better returns. Elongate the process.

When to sell shares to make profit?

Selling a stock is as important as buying one. Though both functions are opposite as far as the time frame is concerned, one may find a lot of articles and blogs for buying but there are very few articles and blogs for selling. Generally, people give more importance to buying but do not realize that whatever is bought has to be sold too. Just like whoever is born will have to die too.

sell shares

The right time to buy shares is when the market is going down, down and down, similarly right time to sell shares is when the market is going up, up and up. Though, most of the people do just the opposite. They are excited about the market or flock towards the market when it is going up and abandon or leave the market when it goes down. And then they say that they have lost everything. They forget the basic fundamentals BUY WHEN LOW AND SELL WHEN HIGH.

Buying the shares at the right price may determine the profit gained, but selling the shares at the right price provides a formal assurance of the actual profit. The benefits of proper buying disappear if one does not sell at a proper time. In other words, time and price of selling are as important as buying, may be more.

When to sell shares to make a profit?

  1. Book profit:- It is seen that many times because of speculation share prices increase suddenly. If you have purchased those shares and prices increase abnormally for no fundamental reasons it is better to sell your shares and book your profit that you have targeted and exit. Because no one goes broke booking a profit. There are chances that they may fall abruptly or may arise after your exit. If they rise you may miss some profit but if they fall sharply then you might be on the verge of wiping out your capital. If they fall too low then you have a chance to again purchase it.
  2. A mistake in calculations or analysis: – Before purchasing stock investors go through a lot of calculations regarding ratios and analyzing over company’s financial statements etc. There are chances that by mistake they may fail to read in between lines or are unable to read “fine print” and make a mistake while purchasing the script. If such mistake has happened and then you realize it when you see shares prices falling, it is better to sell the shares and incur small loss so as to save yourself from a bigger loss in future. Money saved is money earned. Everyone makes mistake. But the best part is to learn lessons from the mistake. Learning after a small loss will help you to make better choices in future. You will learn to read better in between lines and will not forget to read “fine print” as well. One should learn how to turn the negative experience into a positive one.
  3. Valuation:- Buyer and seller determine the market value of shares. It shows the current worth of an asset. Many things are taken into account while determining the value of the share. Like, the market value of an asset, future earnings by the company, company’s management, the intrinsic value depending upon tangible and intangible factors, future cash flow, etc. The company is over or under valued can be come to the conclusion. If overvalued sufficiently higher than its peers it is better to sell off.
  4. Price to earning ratio:- In short called P/E ratio. Check for average P/E ratio of the company over few years (say 5 to 10). One should sell shares if P/E ratio increases significantly from the average that you have calculated. Though, P/E ratio has its limitation too. Along with other factors, this can be taken into consideration.
  5. Emotions:- Whenever trading in share market always use your brains and never your heart. One should not get emotionally attached to a particular script. One should not let buying or selling of stocks be triggered by emotions that is one should not feel over enthusiast when prices hit the roof or sad when they take a plunge. One should always prepare a plan so as to set the target of buy and sell. Always use stop loss and stop gain (so to say). Both lower limit and upper limit should be strictly followed. Sometimes people get greedy and cannot “read” the market. Moreover do not follow their limits strictly.

How To Become Successful Stock Market Trader?

Successful stock market traders do a lot of research on the scripts they wish to buy/sell and then come to a conclusion. And thus they profit the most. Data availability is easy, cheap, and without much efforts at the click of the mouse. Availability of data in different form and format is not a problem but extracting useful data and then interpreting to one needs and understanding so as to profit from it is a real trick.

sucessful stock market trader

We will talk about what a successful trader should have in his/her genes.

  1. Managing risk.

A seasoned trader knows that there is risk involved in each and every trade that he will be doing and hence when planning he takes risk management into consideration. Where as a newbie is very sure of his trades (with all the data and charts in his pocket) and assumes that nothing will go wrong, everything will be as he assumes. The seasoned trader is prepared mentally that if something goes wrong and when the results are not in his favor he is prepared to face it.

He is not considerably shattered by the negative outcome. Everything involves risk and so trading is no exception. It is not possible to eliminate it completely but the impact and ferocity can be dampened by taking the route of diversifying into the different asset class.

  1. Strong obsession and will for trading.

On waking up in the morning and with the newspaper in their hand, they first reach for is the business news page in the inside. Then go in for political news, government announcement, and world news related to their business. They have excitement in their eyes, an enthusiasm of what a new day holds for them and opportunities to cash on.

  1. Gentle and courteous is their hall mark.

Professional traders have the quality of being gentle and courteous. Not all but maximum one are. They are helpful and polite while talking to their juniors or even when they give out hints what other things should be considered to come to a conclusion while picking up some particular script.

They have a good network of people who provide them useful information regarding the company (mostly crucial information). The moment someone gets brash or shows his attitude he loses out on vital information and thus makes bad trades and loses out.

  1. Executing trade perfectly.

Professional traders have a route plan. They follow the same route, which has given good results in the past. They also make a solid strategy with their years of experience. Having a chalked out route and a solid plan they achieve their vision. They are not distracted by small disruptions. Their aim is their vision. They use technical and fundamental analysis to predict future market trends. Many times they hire services of research firms for coming to any conclusion.

Most newbies do not have a strategy. They play by one trade after another keeping only winning or losing trades in mind. Thus they have a limited evaluating capacity beyond winning or losing.

  1. Real expectation and not a wild one.

Most professionals enter the market arena knowing fully well how much certain script can rise or fall. No wild guesses or unrealistic estimations. They calculate their estimations beforehand based on facts and figures available to them. They know the limitations and constraints of the script they have in mind. They also know how much percent of their investment they can earn. They are not greedy so as to keep raising their expectation every time they win a trade.

  1. Determination, dedication, and devotion.

Most professionals are determined to follow their own made rules, making it their habit, dedicated towards their goal and devoted towards their duty as a trader. Even when they suffer loss, they do take it in their stride and again march forward for another day. They do maneuver their plans, adjust accordingly, and won’t give up being battered.

We can conclude that to be a successful trader one should know how to manage risk, should be obsessed of his duty, gentle and courteous with people he meets, executes his trades perfectly, and should know real expected returns on his investment and be determined, dedicated and devoted towards his work.