Some Basic Rules of Stock Market Trading

by Money Maker Financial Services Advisory, Financial Consultant, Stock Market Exper

Share market trading is treated as one of the most risky ways of earning profit in short time. Therefore, for successful trading it requires skills, knowledge and guidance to a great extent.

Follow the trend:

Trend trading implies that an investment policy that takes benefit of long range movements in the market. Trend following is a strategy to be exercised in all trading. It assumes that stocks which have been rising increasingly will keep on rising, and vice versa. A trend follower buys a stock which keep on to rising, or short sells a declining stock, hoping that the trend will continue. An investor can make his mind up whether a stock will be good deal by following trends in the stock market.

Do not Overtrade:

A trader should always focus on the value of each trade, but not simply focus on the quantity. The overtrading is a hardest part and if you continue to overtrade, you will lose considerably. Whenever you enter in to the market, you expose your capital to the market. The more you expose your funds to the market, the more possibility your money will part with you.

Always Trade Liquid Stocks:

A liquid stock is a stock that can easily be sold, since that there is a large quantity of shares being traded every day. With a liquid stock, a trader could easily move out of his position as there are many people trading in the stock every day. Trading highly liquid stocks ensures minimum slippage while entering or exiting the trade. It takes volume to move stocks, so start getting to know the volume behavior of your stock and how it reacts to spikes in volume, which you can see on any chart. Volume is the key to the stock’s movement and its success or failure.

Keep Positions Small:

A critical factor of the success of trading is to take the suitable position size on each trade. Position size implies that how many shares a trader takes on a stock trade and how many contracts and lots he takes on a futures trade. Position size is not aimlessly chosen, rather it is decided by a mathematical formula which helps control the risk and maximize profits out of the risk. To keep loses limited, it is advisable to take small position in trade.

Take tips and advises from proven experts:

When a trader enter into stock market trading, it is highly important to seek proven expert advisory assistance. There are many sources from where a trader can get stock market tips. Whether it is a broker, financial advisor or the financial institutions, it is to ensure that they reliable one. Try and choose an advisory that has extensive experience and the right resources at place to provide sound advice on your trade/ investment.