A stock is a fraction of ownership of a company which the company can issue to source capital for funding its projects.
Basically, a stock is a collection of many shares of the company, where a share is a portion of a company’s ownership or capital.
By those who have mastered the art of making money consistently out of it, the stock market is nothing less than a goldmine.
Are you in India and would like to make money out of the stock market?
Then in this post, I will show you how to make money trading the stock market in India.
How? Here goes…
Detailed Stock Analysis.
You do not want to buy a stock you have no idea about. You are not a gambler but an investor.
That said, you need to analyze the stock you intend to invest in thoroughly.
Here are basic stock analysis techniques:
Observe the price trend
Observe on the price chart how the price of the stock has changed over the recent past.
Has the stock appreciated or depreciated?
Look at price action as well as trend following indicators and see what trend they depict as concerns the stock.
Is it a rising or a falling trend?
A rising trend gives a possibility that the stock may be overvalued and therefore, you do not want to be caught up in a looming price fall when you buy such a stock.
A falling trend hints to the possibility of a stock being undervalued and this means that buying such a stock will yield good results.
Also Read: HOW TO MAKE MONEY IN OLYMP TRADE INDIA.
Unearth the business fundamentals
This is a stock of a given company.
What I’m really saying is, you need to research and find out the company’s profitability, liquidity, debt burden and other growth Indicators.
If they are good and intact and the stock had been undervalued by observing the trend, then that is a go ahead signal to buy the stock.
Check the price valuation of the stock
Yes it has a falling trend and the company’s fundamentals are good, go ahead and buy the stock at the right price.
Check the intrinsic values of the stock as well as the relevant financial ratios and if they confirm that the stock is trading at the right buy price, then you are good to go.
Have you analyzed the stock so well and have seen how undervalued it is?
Do you have a feel of where you expect the stock to be trading in the next say 5 months or any period you choose?
Go ahead and set a realistic target say, 15% in 5 months, where you will exit the trade.
This target should be informed by your prior analysis of the stock.
Never act emotionally – out of greed, fear or excitement.
Buy like an Investor.
Once you have decided that you are buying the stock, then you need to think like an investor, not a speculator.
What then distinguishes investors from speculators?
- Investors look at business fundamentals as they aim to profit from growth in business. Speculators however, focus only on the market price.
- Investors hold stocks for so long to profit from both business growth and price changes. Speculators on the other hand, hold stocks for day.
Buy as if buying the whole business.
Yes, you are buying only a few stocks on the company. But, is the business good? Or it shows signs of tanking!
If I told you to buy a certain company which is seemingly on its death bed, I guess you would not.
Then why are you still buying its shares on the stock market?
Realize that buying its stocks is buying the company.
Therefore, if its fundamentals are not in order, it is not worth it buying a company’s stocks on the stock market.
And remember, it is the company’s performance which determines if its stock prices shoots high or nosedives.
Long term investment.
One of the most critical question to ask yourself is how long you should hold your stocks.
We earlier mentioned that you need to buy stocks like an investor. We went ahead to say that investors, as opposed to speculators, hold stocks for so long – for years.
This is the same thing on emphasis here. You need to practice long term stock investment.
Stock prices and company growth do not occur overnight.
A company’s performance occurs over a long periods which range from months to years.
How much then do you intend to pocket if you are buying a stock in the morning and selling it in the evening?
Yes you may earn some amount but for optimal and maximum gains in the stock market, hold your positions for long enough.
Months or years or so, because it is in those time lines that companies grow. The more the company grows, the more its stock prices soar, the more you gain.
You don’t want to buy a stock and forget you did anything. Check from time to time the stock you are holding so that you can see how it is performing.
This also helps you to establish the right time to sell your stock after holding it for long enough and earning enough money.
It might not have hit your target but considering how the stock is behaving, you can gauge and see when to sell.
You had your target, but it doesn’t mean that you failed.
During the tracking of the stock’s performance, you have seen how the stock price has been behaving.
You have also checked the business fundamentals and the stock valuation.
Do such factors favor the upward movement of the price? If not, this is the time to sell all the poorly performing trades.
If you want to reinvest, you go back to square one.
Do a detailed stock analysis, establish your targets and buy the stock observing all specifications we discussed.
Making money trading stocks is not an overnight gain. Apply the steps above and make consistent profits.