The stock market is the authorized place that involves buying and selling financial securities and is regulated by SEBI. In India, we have two major stock exchanges: the Bombay Stock Exchange and National Stock Exchange. If you are a trader or investor willing to invest in top companies for short-term and long-term gains, most of you may already have started trading in these exchanges.
However, stock trading is subject to market and financial risk; hence one needs to make an informed trading decision to minimize the risk factor associated with the trading transaction. If you are struggling to make gains in the stock market and looking for information about how to become an expert in the stock market and trading, reading this post is invaluable.
11 Steps to Become Expert in Stock Market
1. Prefer Back Tested Strategies
If you are a new trader or have less solid strategies to make informed trading decisions. It’s best to opt for back tested strategies; these are applicable in automated trading, minimize the risk level, and do not affect trading decisions due to emotional change. This trading strategy includes a set of algorithms that may help you make gains from trading. Although while using automated trading, make sure to check its backtest. It’s mainly conducted by running previously executed trade and old data.
2. Balance Your Emotions During Trade
It’s very hard to control yourself to put money in if stock prices are expected to rise. You may be in a hurry to make a significant investment to make gains and fulfill your future goals, such as buying a car or home. However, whatever your goal is, keep your greed far away when executing a trade. Often, traders face loss due to their greed or fear. If you see highly volatile market conditions, it’s best to refrain from performing any trade and wait for favorable market conditions.
3. Analyze Already Executed Trades
Whether you earn profit or lose from your past trades, you must analyze them and determine the factors that helped you make gains or caused losses. This way, you will be able to avoid the mistakes you made in your previous trades and implement strategies that helped you to make gains. If you follow this simple tip, you can easily understand what strategy works for you.
4. Be Very Particular with Your Stop Loss
Another crucial tip to becoming successful in the stock market is to cut down your losses. But how? When you see your trading strategy is failing to make gains and is continuously causing you loss, you must get out of the trade. However, if your trading strategy is making gains and performing well, you should still get out of the trade when it reaches the stop loss. It will protect your profits and avoid losses if the market conditions change.
5. Control Leveraging Most of Your Trade
Many traders borrow money from their relatives, friends, and even brokers they use for stock trading. Although this may work and help you make enough profit. But it can also cause big losses. This may cause an extra financial burden and mental stress. There are many examples where people faced huge losses that affected their personal and professional lives.
6. Don’t Perform If You Are Unsure
If you are unsure about the stock market trends or movements, you must avoid any stock trading activity. You can act like a passive onlooker instead of a performing trader. By doing this, you will understand how the market is performing.
7. Read & Learn As Much As You Can
You have a lot of resources to cover up and learn more about the stock market, success stories, major scams, ways to make profits from the stock market, and how to build wealth in the stock market. You can read books, follow financial news websites, take up some short-term training, and consider reading newspapers. Additionally, you can learn about highly recognized investors like Rakesh Jhunjhunwala and Warren Buffet. It will strengthen your knowledge about the stock market and give you quality insights to help you make better trading decisions.
8. Manage the Number of Stocks You Are Holding
Another tip for becoming an expert in the stock market is to control the number of stock holdings. As a general rule, you should avoid holding more than 20 stocks. Also, when subscribing to these shares, make sure they belong to different industries such as healthcare, finance, auto tech, and hospitality. It will help you keep your portfolio diversified and avoid risk profiles. You should also do self-analysis when buying such stocks for investment and trading purposes.
9. Stick to Useful Investment & Trading Strategies
You must refrain from using various trading strategies as a stock trader or investor. For example, if you are proficient in using the buy-and-hold strategy, you should follow the same strategy with the rest of the stocks you hold. Otherwise, you will get confused and unable to identify which strategy is performing best for you.
10. Know Your Risk Profile & Choose Stocks Accordingly
Your trading decision must be based on your risk-bearing capacity rather than the return the selected stock can provide. Most investors ignore this crucial term and face losses. However, if you want to succeed in stock trading and minimize the chances of loss, you should decide on your highest risk-bearing capacity. Once you define it, you will surely benefit from selecting an outstanding share to generate further revenue.
11. Learn to Be a Disciplined Investor
Whether the market condition is favorable or unfavorable, you must follow your stop loss and predefine in-and-out strategy. If you see the market is crashing, you must wait and see the trends. Moreover, you should also not continue investing if the stock is performing well. You must know when to invest and how much to invest because when you understand these two terms, you start framing some realistic strategies to help you make future gains.
So, these are some tips that can help you become an expert in the stock market. However, learning is the top thing to succeed in the stock market. Therefore, you should learn about famous investors and stock traders like Rakesh Jhunjhunwala, who created their empire just by doing stock trading.