Stock Losses – Ten Tips On How Not To Burn Your Fingers In The Stock Market

1) Start with a small amount-

Remember when you invest in the stock market you can lose all of your hard earned money. And as a newbie you are likely to make all the wrong decisions. So till you gain some experience it is best to invest a small amount of money. Invest only that much amount which you are comfortable losing especially if you are investing for speculative purposes or quick profits. This will be your best strategy to minimize your losses as you begin investing in the stock market.

2) Keep an open mind and keep experimenting-

There is no single right or wrong way to investing in the stocks. Even if you follow some tips you have read on a website or have read a book on investing in the stocks or taken some friends advice, remember things don’t always happen as you plan or wish. So remember to keep an open mind and experiment new things.

3) Don’t be greedy-

We all have been taught this principle from childhood. So you may think why am I even mentioning it here. But greed forms a cloud on your mind that causes you to stop seeing the obvious and you don’t see the pitfalls which you could have easily spotted otherwise. When I started investing the only thing I kept thinking about was how much profit I would earn quickly if I acted on a stock tip. Even though I thought, I might make a loss, at the back of my mind, I would completely ignore that fact and behave as if I would never make any loss. Be practical. Don’t expect to earn $10,000 on your investment of $1000 in 15 days!

4) Buy the best stocks-

Trade only in the best stocks. Choose well established companies. There are some stocks that have high price volatility, which means there is a higher fluctuation in the daily price of such stocks. These stocks may give you higher returns but beware! There is a huge risk in investing in such stocks! You may make some profit on one day and the next day all your profits may get wiped off! So choose reputed companies even though they make have lower price volatility.

5) Use you own mind-

This tip is not meant to offend you. But this comes from my own experience. Do not blindly follow the tips given by friends, family, discussion forums or websites. Do not believe in rumors. I read the discussion thread on a forum and bought huge quantities of a particular stock. Now my stock has eroded 65% of its value. Only later did I find that the company I thought was going to give me huge and quick profits was on the brink of bankruptcy and was making straight losses for the last 4 years. All this information was available on the internet but it never occurred to me that I should do some research about the company I was going to invest in. So even if you have never invested before make your own mind and choose your stocks. Your guess is as good as anyone else and if you have followed tip1 you don’t have much to loose. Don’t forget to find as much information as you can, about the stocks you are planning to invest in, on the internet.

6) Don’t buy at 52-week high price-

Many finance related websites and the stock exchange website displays some basic details about each stock like its current price, previous days close price, stock charts etc. In addition you can find the highest price reached by the stock in previous 52 weeks. I bought my loss making stock at its 52 week high price only to find later that the price started sliding downwards. This may not be true in all cases but its better to avoid buying a stock at its 52-week high price.

7) Don’t pour more money to cover your losses-

There is a tendency to cover your losses by investing more money in some other stock you believe will earn huge profits. It’s best to avoid investing more money to cover your losses till you get some experience of investing in the stock market. This is one mistake I did not make but some of my friends did. There may be some macro events at play that may be affecting the entire market or a particular sector. Some examples are fears of a recession in the economy, this event will affect all the stocks to some extent. Take another example, imposition of new taxes in the cement industry will affect all stocks in the cement sector. So if you pour in more money into some other stock and some of these macro events are at play you stand to lose money in these new stocks as well.

8) Use Stock Calc Widget-

When you buy 10 shares at $10 and sell them at $12 then you don’t make a straight profit of $20! That’s because you have to pay brokerage both at the time of buying and selling of stocks. Stock Calc is a web based widget that I have created and use regularly to calculate the net profit or loss in my stocks. It can also be used to find the right price to buy or sell stock depending on your expected returns. It’s available to everyone for free on my website at http://www.bapatsoftware.com/stockcalc.aspx

9) Lookout for the hidden costs-

Look for other charges that your Broker charges you as well as the government taxes charged on stock transactions. Remember to factor that in your calculations as well.

10) Educate yourself-

Read a book or take a course in stock investing. This is what I’m doing currently.

Disclaimer: I’m not a financial advisor and this article is not financial advice. Please consult your financial advisor before making any stock or other investment decisions.

© 2008. Omkar S. Bapat

Stock Market Trading Tips to Help You Towards Profitable Trading

Stock market trading is one option for risk takers to make extra money even at the comforts of home. Indeed, with the advent of the internet, you don’t have to go anywhere else and trade, but you can actually do this lucrative business right in your own home.

Although you may have heard a lot of feedbacks on how profitable stock trading can be, it is however important to know what it is about and how you can make money out of it. A few stock market trading tips may help you find simple ways to do good with trading.

- Learn everything you can about stock trading. Stock trading can be a promising and lucrative business but it is important to note that it is also has high risks. For sure, you don’t want to venture into stock trading and losing everything you have in just a split second. Although there is no single formula that can consistently help you gain profit in trading, knowing the basics and learning some tips can help you minimize losses and increase your chances of making wise trading decisions.

Keep in mind that the stock market can even be driven by those professional traders who sometimes just want other people to lose. Thus, it is indeed of most importance that you learn, practice and know everything about the stock market before putting your hard-earned money at risk.

- Know the risks of your investment. Of course, you have to know what you are into and know the risks of your investment as well to allow you to minimize your losses in this quick-changing market. Indeed, with the fast changing nature of the stock market, it is a very big help to learn stock market trading tips on how to make wise trading decisions fast.

- Try to invest buying huge volumes of your chosen stocks if you have enough capital. This will help you save money from the transaction costs and trading fees. Make sure also that you are not buying volumes stocks that are not too small that you will end up paying more transaction fees than the cost of your stocks bought.

- Learn online trading. Indeed, you can now trade stocks over the internet, though we tend to think the internet is convenient and easy, there are also important factors that you need to take into consideration if you are interested in trading online. Among the things that you have to consider is having a high speed internet connection and reliable internet service provider and a good performing computer. It is also important to consider that online traffic can also slow down the process of accessing the site where you can trade. Another important consideration is your safety online. Of course, when you are investing your money, it is important that you also make safety precautions in knowing who you are dealing with online.

Find and learn more tips on how you can make money in stock trading. It is indeed important that you are well prepared and you know the risks of your chosen stocks. Do not also forget to include in your stock market trading tips to get a reliable and honest broker to help you trade wisely as well.

13 New Stock Market Trading Tips

Stock market trading tips

  1. Careful selection of trading style: A proper check and analysis on the type of the online trading has to be done on the first hand with respect to where to close every trade when a day finishes. You can also think about a short-term trading, whether you would choose to do the trading weekly or monthly has also to be planned while choosing the trading style. You may feel changing your mind on the trading style in between. So it is always better to select the style of stock trading before you commence the trading activity.
  2. No to over trade: If your trading capacity is Rs. 2, 00,000, it is better to avoid using margin. You can make a choice to trade with 1.5 Lakhs rather than the whole available amount.
  3. Diversify: Portfolio diversification is an ideal technique in trading. You can utilise the option to make investment in different trading sectors.
  4. Buy when vibes are not good: You have to be alert about the stock movements. When you see the decline in the stock value, it is ideal to buy more of them, which is at the time of bad news. So that you need to pay a comparatively lesser price to buy it. The best time to sell these stocks is when there their prices rise. In other words, at the time of good news.
  5. Set realistic targets: You need to be practical in setting your daily targets. A dream of making millions in a single day is beyond practicality. Daily trading with a good patience level can take you to better heights and more profits in stock trading.
  6. Stop loss: It is better to follow stop loss as even though there are chances to lose at times, you can gain experience from a failure for a better success in the future trading.
  7. Strategy: Always make a good strategy for your trading activity. When you set a target, it is always better to wait until you reach the daily target rather than cutting positions before stop loss or make an exit by making minor profits.
  8. Buying at low price and selling stocks at a higher price may be always possible in the stock trading. There can be instances when you have to little compromise on this strategy as it may lead to further new positive outcomes in the stock trading.
  9. When you see a trend when every trader is engaged in buying, it is better to sell at this time. When all are selling, go for buying more stocks.
  10. It is wise to take long positions only in such companies which have a good reputation and strong foundation. For short term trading, you can find stock which can be speculated on a later stage.
  11. Trade the Best Stocks: You need to gain advanced skills and a good research for choosing the superior stocks from the lot. If you are not skilled enough in trading, always seek support and guidance from a professional trader. It is better to avoid huge brokerage companies and mutual funds for this purpose. This is mainly due to the fact that large trading experts usually will not make more money in trading.
  12. For a better success formula, apply stop-loss order. This supports the trader to sell the stock when it declines to a particular price. For instance, when you buy shares of company X at Rs 500 wherein you quote a stop loss price of Rs 495. When the price declines to Rs 495, the automatic sale of shares will occur, so that your loss is only rs.5. The degree of loss that you are able to afford is to be decided prior to entering in to the trade.
  13. Trading is a skill. The do’s and don’ts of it has to be learned before you enter in to trading. You have to acquire knowledge on doing spot amateurs and how to trap the same and take positions. It is ideal to know when to get in and when to get out of the trade. It is better to be quicker in this. One demerit of being an amateur trader is to do the trading at a wrong point. For a skilled trader, it is easier to identify such people and be in the opposite position to trap them.