What Is A Stock Market And How To Make Money Through It ?

What Is A Stock Market And How To Make Money Through It ?

 

“Selling your winners and holding your loosers is like cutting the flowers and watering the weeds”. That’s the game scenario in share market. A market where you study the brains of other individuals, do your own research and then buy your tokens to succeed. Your win depends on how confident and patient you are on the shares you invested in. This market can leave one with a pot full of gold coins but also can gulp all his hard-earned money. All depends on the strategies he is following to get his share in the pie. There is no certainity in this market where the winning is influenced by how others think about a particular situation, lots of brainstorming in forming one’s own strategies, the natural mishappenings, fraud by politicians, rule of parties, law and order and a lot more. Thinking is a never ending process when you invest here but if you have your funds and knowledge about how to invest in such an interesting market, must give it a try, as it’s worth it!!

Stock market, as the name suggests, is a market where stocks are bought and sold. Here, a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the same stock. And when the bid and asked price matches, transaction takes place.

Where this transaction takes place? Stock exchange is the place which provides buyers for a seller and sellers for a buyer. Some of India’s premier stock exchanges are NSE( National Stock Exchange-established in 1992) and BSE(Bombay Stock exchange- established in 1875).

In such a volatile market, where decisions are influenced by end number factors, there is no hard and fast rule which can help you out. But still one can have his own strategies while dealing here.

Some of the ways to earn money through share market are-

  1. The fundamental way

The quote by Peter Lynch which states, “selling your winners and holding your losers” gives us the glimpse of patience level needed to deal in stock market.

Fundamental are the financial principles of stock market. Investors needs to be knowledgeable about these financial principles and should be extremely patient. As well as, must be ready to face the losses patiently.

  1. The technical way

A technical trader uses charts and patterns that are formed over previous years for the analysis. Many fundamental analysts consider it to be nothing short of voodoo practice, but when one compares the returns of a technical trader with that of a fundamental investor, the former wins hands down. In technical analysis, trader can gain expertise in studying the patterns and can form his own strategy. This would help him in being consistent in his returns.

  1. Avoid the clouds of emotions in your judgement

As Warren Buffett said , “Be fearful when others are greedy and be greedy when others are fearful!”

Trading tests the emotional stability of a person. There have been cases when bull market left many investors empty-handed. The lure of quick wealth is difficult to resist. Instead of filling up their pockets, these investors burnt their fingers. In case of bear market too, sometimes investors panic and sell their shares at rock-bottom prices being sentimental which lands them from a state of euphoria to a state of total despair.

  1. Investing in business one understands

Don’t just invest in shares seeing its name in the market rather see its business, understand the factors influencing its share prices and then invest in it. Taking such informed decisions reduces the risk of loss.

  1. Investing only surplus money

No one can be 100% sure in this volatile market. Therefore, see whether you have surplus funds or not which you can afford to lose. And if your investment gives you huge gains, re-invest the interest earned as well. This compounding effect can multiply your surplus fund.

  1. Avoid being a part of the herd

Not investing through your head but by seeing what others are doing is the biggest mistake an investor can make. Some investors get influenced by the decision of their relatives, friends or colleagues and start putting their money in the same shares and end up incurring losses. That’s where it becomes important to have your own strategies to survive in this market.

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