My Experience with Share Market and Investments
INTRODUCTION:
Starting to trade or invest is an easy process. The rise of numerous online trading platforms combined with low capital requirements has increased retail investors. This phenomenon has been further propelled by the COVID-19 pandemic. While millions of individuals venture into the realm of stock market trading, very few can generate constant returns. This can be attributed to various reasons like lack of proper knowledge, herd mentality, greed, etc. You need to aware with share market basics before investing in share market.
This article will discuss how my trading and investing journey began. And give some tips from my experience in the market so that you can avoid the same mistake I made.
How did I begin trading and investing?
I was first introduced to the stock market during my college days. A friend of mine traded regularly and introduced me to the world of stock market trading. Seeing all his profit, I dove into this world only to find myself making losses. Then came the COVID-19 pandemic. During the pandemic, I began learning about the world of stock market trading and how trading differs from investing. I learned about candlesticks, charts and patterns, stop-loss, risk management, etc. Knowing all this made me more appreciative of the trading world. This has enabled me to generate profits while containing my losses.
Dos and Don’ts While Trading and Investing
These are some tips that I have compiled from my trading and investment experience.
1. Before starting trading or investing, learn how to trade and invest.
The stock market is an enormous well-oiled machine with various participants, each with its own purposes. For instance, intraday trading (speculating) ensures that the market is liquid and enables price discovery. Learn about candlestick patterns, support and resistance, indicators, oscillators, etc. This will help you develop your own trading system (more on this later). Understanding a company’s financial statements is necessary to value the company for investing purposes.
2. Avoid emotional trading.
This arises when you are emotionally invested in the market. Doing so may result in revenge trading. This is a scenario where you trade just to recover your early losses. Human beings are very susceptible to psychological biases. This will steer you to make bad trading choices, ultimately resulting in more losses. To avoid emotional trading, develop your own trading system and strictly adhere to it. Study behavioral finance to learn more about emotions involved during trading and investing.
3. Develop your own trading system.
Avoid relying on others for stock tips and investment opportunities. While their recommendations may be profitable, you are left at a disadvantage. The stock market is constantly evolving. The trading system that works earlier may stop working. If you can develop your own trading system, you can adapt your system to the ever-changing market scenario. You can use technical analysis for trading purposes and fundamental analysis to find investing opportunities.
4. Know the difference between trading and investing.
Trading is about speculating the market’s future direction to profit from it. While on the contrary, investing entails buying assets that have the potential to grow in the future. Investing requires you to take a long-term approach to benefit from the market movement. You can invest and trade simultaneously, as many people do. But keep a separate fund account for trading and investing purposes.
5. Manage your risks.
More than profit generations, trading is all about risk management. Failure to manage risks can be catastrophic. Using stop-loss saves you from sustaining heavy, devastating losses. Beyond placing stop-loss, you should risk only a certain percentage of your total capital. This percentage depends upon individual risk tolerance capacity.
Conclusion:
Increasing accessibility to trading and investing platforms like the accessible procedure to open demat account has made it easier for retail investors to begin trading. The stock market is ripe with opportunities. Whether you can reap the said rewards totally depends upon you. Constantly learn about the market and its trends. Follow the tips given above to avoid the mistakes I made.
