The stock market is a potentially lucrative yet volatile way to grow your money. Whether you are an aggressive trading expert or a trader who follows conservative trading strategies, the stock market comes with challenges. However, some traders gain high returns on their invested money in this volatile market because they know the golden rules of trading.
So, before you buy your first shares of stock, you should be familiar with the most significant rules of trading in India. To put your confusion at bay, we have discussed the 10 best rules to guide you on how to begin trading in the Indian market as a beginner.
10 Best Rules for Successful Trading in India
Here are the 10 best rules for trading that you should apply from the first day of your trading account activation:
1. Understand the Business of the Company
When you buy a company’s shares, you become its partial owner. Hence, you must know the company’s financial health and expert investors’ confidence in its business. These two significant factors can help you get a fair idea of how much profit the company can make in its year-to-year revenue growth.
2. Start by Investing a Limited Amount
The stock exchange always advises you to exercise caution while trading in the market. Avoid putting all your savings on the stock market, and invest as per your risk appetite.
3. Be Patient
Another important lesson to learn when exploring how to begin trading is patience. Often, beginner traders anticipate that a stock exchange bull trend can assure short-term profits. It is best that you invest with patience. Do not expect quick profits, and make emotional decisions while trading.
4. Educate Yourself with Global Market Events
You should regularly keep an eye on domestic as well as global market events. While as a beginner, it may be difficult to understand all the key market movements of the global economy, you can keep learning how various factors impact your domestic market.
5. Start Slow
When learning how to open trading account, focus on the viable investment strategy. As a trader, you should regularly monitor the quarterly results or latest news of companies that you have chosen. As a beginner, it is not easy to follow the latest developments of more than 5-10 companies' performance. Hence, invest in only a limited number of companies.
6. Avoid Penny Stocks
Companies that do not have adequate liquidity offer penny stocks to traders or investors. They are priced very low but often claim to deliver high returns with high risks. Avoid buying these stocks because of the company’s small market capitalization and no guaranteed growth in the future.
7. Know the Difference Between Defensive and Cyclical Stocks
Defensive stocks claim to offer long-term gains with a lower risk. The major advantage of buying these stocks is that their companies' performance remains unaffected due to economic fluctuations. On the other hand, you can see an aggressive volatility in cyclical stocks’ prices. Their companies' financial health is considered very sensitive to economic volatility.
8. Understand Stock Exchange Jargon
Learn different techniques and jargon of the stock exchange market to become a successful trader. There are many kinds of stock orders that you should know.
9. Overcome Your Fear
Avoid staying glued to market updates, as the pressures can make trading difficult for you. Purchase good stocks of high-performing companies. You can greatly cut back losses if you know how to hold good stocks with patience even when their prices decline.
10. Find Out the Dividends of the Chosen Company
The dividend represents the share of profits that the company shares with its shareholders. Try to bet on those companies whose dividends are rising over time.
Over To You
While investing money in the stock market is a good idea, you must exercise caution while investing money in the stock exchange. The general rule of thumb is that you should not put all eggs in the same basket, so as much as possible, diversify your portfolio. The risk-reward benefit usually remains volatile on a company’s stocks due to the market’s instability. The second essential thing is that you should only bet on those companies whose business opportunities and risks you understand.
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