The stock market is one of the less complicated ways to build money. One of the various ways investors have acquired wealth over time is by purchasing business shares and keeping them until their value increases or until dividend payments exceed or at least equal their ownership position in the firm.
However, this strategy—more popularly known as “investing”—involves keeping a long-term perspective on your ownership in a firm and riding the market volatility until your share starts to generate profits. Fortunately, developing the skills necessary to become this kind of investor usually doesn’t cost much, can be done quickly, and only takes persistence over time.
But stock market trading is a very different animal, needing completely different abilities and refined temperaments to excel at. Contrary to “investing,” “trading the market”—or “speculating,” as it is more widely known—requires a bigger analytical skill set, an adventurous attitude, a higher risk tolerance, and a larger financial investment than what most long-term investors may be ready to make. and, most crucially, the Japanese term “Dairokkan,” which denotes clairvoyance or a sixth sense.
According to one claim, since 1926, despite several economic downturns and crashes, common stocks have nonetheless given investors an average annual return of 7%. This amounts to returns on investments in any publicly traded firm of over 300,000% (three hundred thousand percent) during the almost century-long period, which may still be in existence today. However, some experts believe that your investment may have been worth more than 2,000,000% (two million) or perhaps much more in specific circumstances had you chosen to “trade the market” over the same time period.
Without a question, even though it is more risky, “trading the market” may be a successful way to increase your wealth over short and long periods if you have the information and abilities to know what to do, when to do it, and how to do it. But the real question is: Do you?
In this essay, we’ll talk about some of the traits you should look for, skills you should have, and personalities you should have if you want to trade the stock market like an expert who makes a living off of the market’s daily changes.
1. Keeps stock prices close while keeping your broker nearby.
When trading the market, one common error many uncertified brokers make is to believe that they can succeed just on the basis of their knowledge and analytical abilities. Even if they are highly helpful, no one can ever really understand a market and all of its complicated workings better than the individuals who work there every day. Being friends with your broker does not necessarily imply remembering their birthday off the top of your head, but it does imply being able to contact them easily for advice on what industries or companies you should be researching for your trading portfolio.In a world where there are so many stocks to trade and thus anything can go wrong, having an “insider” goes a long way toward keeping you informed of market developments that could earn you some good money.
2. Keep an eye on the numbers; the devil is in them.
Knowing which stocks are “hot” and which are not is not all there is to trading stocks. It also entails comprehending why. Numerous times, the figures or, more often, the company’s reported financials held the answers. Knowing how to read a company’s financial statements and figure out ratios can help you decide which stocks to hold and why, especially when the market is going against you.
3. Draw a line in the sand:
Trading stocks may be enjoyable, especially when you make a “good selection” and the market value quickly increases after you take a stake. But you must realize that the market is unpredictable. Nothing in it remains up for very long, and nothing in it remains down for very long. So, you need to figure out how much risk you are willing to take by thinking about your age, income level, trading goals and timeline, immediate financial needs, and how high you are willing to ride a wave.
In contrast, the opposite is accurate. Before jumping ship, you must consider how low you are prepared to take the stock. But as was already said, your decision to take a position in the first place should always be guided by your ability to interpret financial figures and a quick conversation with your broker. Jumping ship may be expensive in and of itself, especially if you do it too early or, worse, too late.
So, you must…
4. Get away from the group; they could be forcing you into a trench.
Nothing could be more alluring than seeing a stock’s price soar exponentially with the possibility of more increases. Unsophisticated traders are a lot like those who want to participate in short-term activity but don’t know how much petrol is left in the tank to carry their trades far enough to make a profit. You must realize that every time you make a transaction, you incur costs with your broker, the market regulators, and even the government in the form of deductible taxes and other payable fees. Hate it or love it, you have only produced money for others and not for yourself if the price increase is insufficient to cover these costs and then make you some more money in addition to that.
They also exist in many corporate sectors, and the stock market is one of the oldest sectors where these individuals have operated. meaning that sometimes, very wealthy individuals may be purchasing stock in a corporation just to raise its price to their advantage using legal but artificial means. If you don’t follow the first two rules listed above, you could end up with nothing when your hopes for a quick four-day gain are dashed after only one day and the market suddenly turns against you, dropping far below your buy-in price.
The maxim “If the data do not justify the increase, then do not be lured” is a tried-and-true guideline to use in such circumstances.
However, in other cases, a corporation may have announced financial figures that were better than anticipated, and the market ecstatically jumps in to acquire positions in anticipation of financial benefits to its shareholders. Even while taking a position in step with the market could be acceptable, you should still consider your timing and motivations. Keep in mind that you are “trading,” not “investing.” In order to get your speculative investment to a desirable level of profitability, you must thus analytically predict how much steam is sustainably left in the engines; otherwise, you will once again be earning money for someone else. This therefore brings up the following point:
5. Focus on the stock rather than the market:
One simple method for avoiding fleeting, and perhaps unjustified, mass-market excitements is the charming little tactic known as “cherry picking,” which is used by astute traders. In order to do this, a lot of firms must first be analyzed, and just one or a small number of them must seem to be undervalued before positions can be taken. By using the “cherry picking” approach to identify inexpensive stocks, you have more time and reason to completely comprehend a firm and how its stocks typically perform in a range of market and economic situations before determining the optimal time to invest. Consequently…
