How to make money in stock markets?
Know the kind of a trader you are
There are basically two kinds of traders in stock markets; one kind includes those who follow fundamental investing and the second kind are the speculators. The major difference between these two kinds is the way they see the price of the stock. The investors who follow fundamental investing give less importance to the price of the stock when compared to the speculators. Such traders are more concerned about the fundamental strengths of any company. To make good money in stock markets, one should practice the fundamental method of investing.
Learning about stock market trading in India is simplified if you know your own personality. Besides the categories of traders listed in the previous paragraph, you should also evaluate your potential for risk. Can you take risks? How will you face a loss, if any? Risk-taking behaviour is also related to your ability to afford your stock trades. Are you financially capable of affording losses, even though they may be initial? These are questions to ask yourself before you enter the fray of trading. You have to be physically ready and mentally astute enough to take highs and lows, especially the lows.
Try and avoid the herd mentality
Several traders in the stock market enter the arena with enthusiasm. Therefore, there is always a tendency for traders to rely on the opinions and advice of other traders. There is no way of getting rich very quickly. Still, For many traders, the decision to buy or a sell a stock is mostly influenced by their acquaintances. So, if everyone around them is investing in any particular stock, a potential trader too tends to invest in the same stock. Avoid such practices as such strategies do not work well in the long run. World’s greatest investor Warren Buffet was not at all wrong when he said that one needs to be fearful when the others are greedy and needs to be greedy when others are fearful.
As a trader, you should be aware to catch yourself when you are blindly “following the herd”, as you may do so without really being mindful of what you are doing. Each trader is different from the next, in terms of personality, goals, and trading strategies employed for investing. Moreover, if you go ahead and invest without considering the factors unique to yourself, you may find yourself more confused than when you started out.