Tricks to make money in the stock market - IndianMoney.com

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Tricks to make money in the stock market :

                 

You must have watched a lot of cricket. In cricket each top order batsman has a particular style of batting which makes him unique.He continues in the same style of batting for many years with minor modifications and accumulates lots of runs.

In the same way, as you invest in the stock market you need to learn certain methods which if successful can define your style.

Don’t buy too many stocks:

Select certain good quality stocks and stay invested in them. You do not need to pick 100 stocks and invest small sums of money in them to become rich.

Pick your winners. Select about 15-20 good quality stocks (Preferably good blue chip stocks) and stay invested and accumulate them when their price falls.

Pennywise pound foolish:

You might believe that buying a stock which is cheap is a good idea. Stocks are available for INR 10 and INR 50.These could easily double.

The blue chip stocks cost a lot of money. Maybe a couple of thousands. Why buy such costly stocks?

If you could buy about 200 shares of INR 10 each of a cheap stock and they were to increase to about INR 20 in a few months your INR 2000 would be INR 4000.But does this happen? Most of the time No….Stocks are cheap for a reason. If a stock has poor fundamentals and a low chance of making a profit (earnings are not good or too much debt on its books) it might not do well. It would remain cheap or even reduce.

If a stock is costly (say a couple of thousands) and its earnings and growth prospects are good it might rise rapidly in a bull market.

You need to buy few but good stocks.

Analyze your successes and your losses:

You need to study how you have made your investments and see it you can detect any flaws in your trading.Did you buy the stock at the right price? Did you sell it at the right price? If No Why…What could you have done better?

Practice the art of diversification:

“Do not put all your eggs in one basket”. Invest in different sectors and invest in the market leaders in each segment.

Even if certain sectors do badly certain other sectors would do well. This means your portfolio stays protected.

“A rising tide lifts all boats”

In a bull market even stocks which have weak fundamentals rise. You need to make a note of the stocks in your portfolio which are not doing well.

You must sell these stocks when the stock market is in a bull run. There is no better time to get rid of the stocks in your portfolio which are doing badly.Use bull runs to get rid of fundamentally weak stocks and bearish periods (times of weakness) to buy and accumulate good quality stocks.

Finally history always repeats itself in the stock market. Think you have missed the bus….Fret not. Stock markets always give you a second chance to correct your mistakes.

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