25 simple tips to win in the Stock market
The deception in bank interest rates and low remuneration offered by traditional saving accounts, comparing with financial success of some people in the market, have led to a massive influx of new investors into the stock market. But while a source of wealth and fortune for some, the market can also ruin your finance if you don’t know how to play the trading game.
This guide contains 25 tips and pieces of advice to help you succeed in the stock market. It is not meant to make you a seasoned investor, but to give you some good basics that will prevent you from falling into crude traps. Practicing them carefully and time will allow you to know when and how to buy stocks online.
Here are 25 tips to help you win in the stock market
- Listen to the market
The stock market is often a matter of psychology and anticipation. When all investors are positive then the rise is soon over, and vice versa. The recent history of the stock exchange has shown this again. For instance, in the first quarter of 2000, a technology company announced a capital increase, a factor that traditionally dropped stock prices; it was growing on the stock market. Unfortunately the end of the rise was near. We know what happened later; it was a bitter disappointment. So do not let yourself be overcome by the euphoria of the collective or by downhearted investors.
- Take advantage of takeover bids
In case a security is subject to a takeover bid, it may be wise to buy the value! Indeed, a tender offer guarantees you to sell your shares until a certain date and at a fixed price. By purchasing a value that is the subject of a financial transaction, you take a very low risk: the difference between your purchase price and the price of the takeover bid, and you reserve the possibility of benefiting from a possible outbidding.
In summary, you have a few percent to lose and a lot more to gain. It is, however, very important to note that the closing date of the takeover bid and resell your securities before the end of the transaction.
- Never sell at the highest level
As some say it, the stock exchange is the temple of regrets. You sell and value rises, you buy and it drops. Do not lament for two reasons: first of all, it will not help to grieve or depress yourself over the loss; second, a share price reaches its highest and lowest only once a year. Those who buy or sell under the best conditions are, by practice, not very numerous.
4. Be careful with risky countries
A financial crisis, in Asia or Latin America for example, can create risks for companies in these concerned locations. It is not a good idea to keep shares at risk of devaluation, even if they are quality values; you will most likely lose in such cases. Taking risks in certain sectors can be profitable sometimes, but in the stock market this one most of the times lead to disappointment. Do your best to stay away from this type of companies even if they offer cheap stocks.
5. Know how to wait
When a company is the object of a financial transaction, many small shareholders who realize a surplus value, are in a hurry to sell their shares. They do not wait. It is precisely the reverse that should do. By retaining their shares until the last day of a transaction, they reserve the possibility of benefiting from a counter-offer, and thus increase their surplus value.
- Do not fall for deceitful forecasts
Beware of untrustworthy companies that do not keep their previous forecasts. In some cases, a downturn in the economic situation may lead to difficulties for a company, and it will send the market a warning about its results, which is negative in the short term but has the merit of being healthy in the long run. However, some companies have the unfortunate habit of promising mounts and wonders for the purpose of raising funds and raising their share price …
Some time later, they announce that their forecasts will not be kept, always with good reasons. You have to flee these companies because in the vast majority of cases you will go from disillusionment to disillusionment, and your losses will accumulate. In short, if a company has betrayed your confidence in the past, be sure, unless there is a change in management or leadership, that the same disappointment will start again.
- Beware of rumors
Finding a good product to make a quick fortune is the dream of all investors. And it is very tempting to newbie in the stock market to make their decision on rumors, often looking for cheap stocks. However, these speculations are rarely proven, or do not last in the stock market. So beware, because you risk of being the last link in the chain, the one who buys the highest and then sees the stock collapses. It is very likely that when the pipe arrives to you, a lot of People have been informed before you. They bought cheaper titles and will be happy to sell them at high prices.
8. Be careful with bear market
This term describes a market in which prices are falling, which encourages selling. You anticipate a decline in the market but you do not want to sell some beautiful values of your portfolio? Be sure it’s likely you regret it. Indeed, a bear market is characterized by an absence of buyers: there are not many people to buy your securities, even the great values. On the contrary, some sell them, for example, to exteriorize old gains. There is really nothing to gain in a bear market. You don’t have to take any risk.
9. Trade as a warrior
Trade as if you were a mercenary in a guerilla war. Being a trader, you are in a fight to win (make profits) against the enemy (the fluctuation of the market). You must fight for the side that has the most chance of winning the war, and you must be ready to quickly change sides (stocks/shares) as soon as the wind turns. If you want to successfully buy stocks online, your strategy must be to constantly fight alongside the army that is most likely to prevail and change as soon as this is no longer the case.
- Be mentally prepared
There is no such thing in the market business: a sweet road without thorns. In fact, this does not exist nowhere in the real world. Having capital in bank is nothing if you do not have the mental capital. Whatever you think, your mental capital will apply it. No matter what monetary capital you have, it is your mental capital that will make you a good or bad trader. The mind can allow you to survive long enough to learn from your mistakes, as it may attach you to losing positions and lead you gently but surely to ruin without opportunities to improve your strategy.
So your mind can make you lose financial capital and this same loss of financial capital will have repercussions on your mental capital. And if you let your mind leads you to believe “you are a loser” due a failure, you will continue to trade with that fear of losing, which will promote the establishment of a vicious circle of repeated losses. As they say, a loser never wins, a winner never fails.
11. Buy high and sell even higher
Your online trading goal should not be to buy low and sell high but to buy high and sell even higher. As a trader, you will never know that the price is at its lowest; it is called anticipation, and in the online trading game you have one chance out of two. As one cannot say that a price is necessarily a top.
One thing you need to know is the fact that in any fall of a share, from several dollars to a few cents, traders always consider it inexpensive and less and less expensive as it losses another %. It is therefore never a pledge of absolute low point.
- Differentiate between bull vs. bear market
Generally, a bull market is a period of rising prices. Its beginning is marked by widespread pessimism. A bear market, in the other hand, is a general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism.
In a bull market, the only attitude to have is to be long or neutral at worst. In a bear market, however, the only attitude to adopt is to be bearish or neutral. This may seem obvious, but it is not. It is often a rule that traders learn, most of the times, when it is too late.
- Avoid trading based on your thoughts
Markets can remain completely illogical longer than your capital can assume or think. In fact, this happens 80% of the time that the stock market is up and down. Do not trade according to what you think, but according to what the market tells you to think. Sell stocks that show weakness, and buy those that show the most strength. Gaps often indicate a change in trend, so try to be there and prompt to act from the very first day the change occurs.
- Take advantage of winning cycles
Trading is a business of different cycles: some good, most bad. Trade aggressively and broadly when you are in a winning cycle, and do so modestly when you are in a losing or risky cycle. In your winning cycles, even your bad trades will always be profitable. In your bad cycles, however, even the actions you have selected with the utmost attention will not go in the desired direction. This is the nature of trading; you need to accept and take advantage of it by playing the game wisely.
You need to do your best to learn how to make your own technical analysis that will help you to know when to buy and when to sell at the best time. Although at the beginning this can be very challenging you need to persist in learning this; your success depends greatly on it.
- Adapt your thinking and respect the trends
To be a winner in the stock market, you need to think like a fundamentalist, and trade like a technician. It is important to understand the macroeconomic events and fundamentals that drive the market, but it is even more important to understand its technical aspects.
You need to respect the trend reversals after long bull or bear markets. The reversal days indicate that the rise or fall has come to an end and that the strength of the previous market has weakened. Act accordingly and respect the signals.
- Keep technical analysis simple
Making complex analyzes with too many indicators or parameters will only add confusion to decision-making. This is even more confusing to traders new in the stock market. Complex analysis will lead to do nothing but to paralysis in the action making, while a simple analysis system will bring speed and elegance to your decisions.
- Respect periods of retracements
Respect, after major movements, periods of retracements which bring back fluctuations in contact with major trends. These retracements are made towards 50 and 62% of Fibonacci. If retracements are not as deep and stop at 23, even 38%, is that the bullish movement will go to seek a higher high point even before consolidating and retracing 50/62% of the movement.
Understand, then that when you miss the train of the rise on an action, it is pointless to run after and overpay the title. Wait for a retracement or just go somewhere else and choose another one.
Understand that in the stock market, knowing how to analyze and understand crowd psychology will always be more useful than understanding the economy. Markets are led by human beings who are like you and me; they make mistakes, bias their judgments and make irrational bets.
- Have a good strategy for long-term investment
It is crucial to have a good strategy to invest at long-term in a market and fragment its positions. The first will be taken when the bear market is weakened and a floor seems to have been found. The second position will be added when the market confirms the breakdown of a significant resistance confirming the establishment of a bullish movement. Finally every retracement in this new trend will be an opportunity to add positions, until the bullish channel breaks down and gives the sell signal.
- Understand how bull and bear markets work
Remember that the bear markets are very violent and tend to take 4 times more quickly the gains earned in the previous bull market. But also understand that the so-called technical rebound retracements are also 4 times stronger and faster than those seen in a bull market. So you have to be a “buy & hold investor” in a bull market and add positions during retracements, and during bear markets play only the retracement phases, rebound techniques that are extremely profitable in a short time.
- Be patient and careful
Be patient with your winning actions, and extremely careful with your losing actions. Remember that even if you are right only 30% of the time, it is always possible to make a lot of money in the stock market simply by cutting the 70% where you are wrong very quickly and leaving the 30% of times where you are right. This behavior can bring you back big profits. When you make the balance sheet at the end of the year of your capital gains and losses, admit to being a good trader if your winnings were big and all your losses are small. Being right 90% of the time matters little on the stock market and will not tell the difference between a good and a bad trader.
- Focus your attention on what works
Do more things that have been proved to be working but very few things that prove their ineffectiveness. Following what that has already worked is even more crucial for new traders. Guided by pride, human beings tend to want to turn something that does not work into something that works just to prove others they can do it. This always leads to disappointment in trading. Focus your attention on what works, and let go of what does not. When a market is bullish and strong, buy more positions, when weak, sell. Is that simple?
- Seek for difficult trade
As they say, a good trade is a difficult trade. If it does not pose any problem or reflection to you to sell, this is not the time to sell. It is the same, if you do not ask yourself any question to buy is that it is not the time to buy. The stock market is difficult, if you do not doubt it is that you do not invest in the right way. Most of the times, a tough trade is a good trade. Difficult trades are the ones that crowds do not look for, one more reason for you to get involved.
- Break the rules when you have to
No one obey the law to the fullest. It does not mean the trading rules are made to be broken. The key is knowing when to break them, in what way and over what period of time to neglect them. Being too strict in following them can cause regret. It is the same if you neglect them for too long or foolishly you will regret it.
- Read Books
Knowledge is in books, and this covers every aspect of life. If you want to be an efficient investor you need to read, read, and read again anything that can improve your ability in investing. From “Stock market for dummies” to more advanced tools, there are many trading books on the internet which can greatly expand your performance. For some reasons, I will not recommend any author or book. You can Google, Youtube, and Amazon to find what best response to your needs and make your collection.
- Get involved in community
Joining trading communities which focus on helping one another to succeed is a mart thing to do. Not only you will read fellow traders own experiences, from which you will surely, you can also ask questions and find answers to your most challenging problems. Remember, as it is the case for every online community, don’t be selfish, only see yourself. Help others while they are helping you. Take the time to read other members’ questions, and answer them if you can.
Do you want to get started in the stock market without falling into the traps? Do you want to progress quickly? Or you are not new in the business but you are tired of losing all your hard earned gains in an instant? Do you want to successfully buy online stock? Apply these tips.
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- US Securities and Exchange Commission: “Stock Trading”. Retrieved 18 May 2017.
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