The Stock Market is one of the primary platforms an investor uses at the beginning of his investment journey. However, it’s important that you should know how to earn money from Stock Market the right way. If you follow basic strategies & apply simple methods, you can earn good income from the Stock Market.
In this article, we have mentioned the methods & strategies that many successful stock marketers have applied. We have listed down these methods in form of important tips. These tips explain how to earn money from Stock Market in a systematic manner.
Top Tips On How to Earn Money From Stock Market in India
We have devised this mini guide on how to earn money from stock market especially in India. In the process, we have also analyzed the overall trading style & strategies of many successful traders. Hence, if you follow these tips systematically, you can make a good amount of extra income through stock market investments. The tips are as follows:
Tip 1: You Must Identify the Overall Market Phase
It is vital to identify the market phase of that particular period. For instance, understand whether the market is in a trading phase or a trending phase. This analysis will help you to decide whether to buy or sell breakouts. A person can buy weakness & sell strength during a trading phase.
The failure to understand the sentiment of the market can escort you to use the wrong indicators. This is because you are not aware of the right market phase you are into.
Important Point: Enquire with your Relationship Manager about the Market phase. He will give you a good idea of the overall market phase. This is will help you in successful trading.
Tip 2: Carefully Observe & Then Trade
In this case it will be wise to study the market patterns throughout the 1st half of the trading day. The 1st half is driven by the emotions, overnight movements & outcomes of the preceding day.
You can take trading related decisions in the 2nd half of the day after you observe the trend & pattern in the 1st half. This is because the real trends actually emerge during the later part of the day.
Tip 3: Just Avoid Hurrying up to Book Your Profits
It may often tempt you to book your profits early. However, avoid it till the market appears to be optimistic. This is because, you might let go of significant trends in spite of having a good start entry into the stock market.
If you want to safeguard your profits, do it in steps. This practise will also help you to keep scope & take advantage of the rest of the move. The ideal steps can include categorizing your profits into profits that are small, small losses and huge profits. This is a good way to get the maximum benefits of the market trend.
Important Point: Build a good rapport with your demat account manager & discuss your profit plan with him.
Tip 4: Never Buy a Stock based on its past performance
Stock markets move in phases. During one phase, if it shoots up, it may go down during the next phase. It actually relies on the routine economy performance of a country. Hence, if the country’s economy is performing well then stock markets show an upward trend and vice versa.
It is not necessary that a particular stock that generated certain returns in the previous year is bound to generate similar returns during the present year. It depends on many factors such as the company’s movement, market conditions & condition of the economy. It is always wise to know the company’s stock performance in the past. However, it is dicey to completely depend on it without you consider the other factors.
Tip 5: Don’t be Swayed by Unfavourable Events
An adverse event in a particular place may not essentially result in a pessimistic impact on the stock market as well. In fact, it depends on that particular event’s nature. You must study the impact the event may have on the whole economy altogether. This will highlight you to an ideal conclusion as to how that particular event will impact the stock market.
Consider this illustration- The earthquake which occurred in Gujarat. Everyone had speculated, the earthquake would destroy the country’s economy & stumble the stock market as Gujarat possesses the largest number of investors.
However, the market responded in a diverse way & recovered all the losses gradually. In this case, the event charged the economy because reconstruction was taken up on a big scale. This boosted the cement and construction industry altogether.
Tip 6: Treat Every Trade as Just Another Trade
It is important to remember that each trade you do is just another trade. Also you should expect only normal profits in every trade. Below average profits do take place, but on a rare basis. However, you should not expect it often & rely on it. Remember one thing that you must increase your risk only when you find that your equity is capable enough to facilitate that risk.
Tip 7: Majority Doesn’t Always Win
You should avoid conversing with a large number of people in the trading hours. This will prevent you from confusion and chaos that may hamper your wise decision.
However, it is always good to talk to people who are experienced traders. But do this after trading hours. This will help you to gain a broader perspective on the market conditions. For instance, consider if the market is too volatile. It may actually benefit, if you just pull back for some time, even if the numbers in majority do not agree with the same.
Tip 8: Diversification is Good, but don’t overdo it
It is advisable to avoid channeling all the money in one single stock. This may have adverse effects as all your returns on the investment will depend on the performance of that single stock. If it performs well it will give good returns, but if it is the other way round, then you will face hard time. In such cases, diversification is the key.
In diversification, even if one or two sectors under perform, you will gain from other sectors. This prevents you from complete loss & gradually you can recover all your losses & make profits. Diversification of investments is a must if you want to mitigate your risk. However, don’t over-diversify your portfolio. There are chances that it may deprive you of the rewards from profitable investments.
So now you know some of the best tips on how to earn money from Stock Market. Follow these tips & see your stock market investment returns rise in the long run. Also, you can check this great piece of info on how to make investment in share market in India.