The Art of Trading

Trading in the share market can be complicated and unpredictable. You must have heard people talk about making and losing money in the share market.

Trading in the share market requires fundamental knowledge of all the factors that influence the demand and supply in the market. Given below are some trading tips that can help you cut your losses by investing in a more efficient way.

1. Stop loss

Stop loss is a trading tool that allows you to cut your losses while trading in the market. When you put a stop loss at a certain price of your stock, it is automatically sold when the price falls below the stop loss price level. For example, if you have bought shares of a company at Rs100 and you have put a stop loss order at Rs90. If the price falls to Rs90, your shares will be sold automatically, thereby reducing your loss to just Rs10.

2. Background research

You must thoroughly research the company in which you want to invest in order to make a successful investment decision. Background research involves checking the balance sheet, income statement, cash flow statement, short-term and long-term earnings, and the company's past performance. It will allow you to determine the future growth potential of the company and whether you will be able to get a regular dividend if you choose to invest your money in the company.

3. Regularly monitoring investments

One of the best trading tips to be successful in the share market is to monitor your investments on a regular basis. Regular monitoring of investments helps you sell your shares immediately if you think they are going to fall below a particular price. Apart from this, you can also earn huge amount of profits by selling your shares at the time when they are at their highest price.

4. Patience

Investors lose out on great opportunities when they sell their stocks too early. If the price goes slightly higher, they sell the stocks and book whatever profits they get even when they could have made so much more had they waited a little longer. You must be patient and wait for the perfect time before making an investment decision. You should sell your stocks only after analyzing the market trend. If you are sure that the market will not rise any higher, then only you should go ahead with your decision to sell.

5. Don't follow the herd

One of the most gruesome mistakes you can commit in the share market is to invest just because everyone else is investing. You have to understand that your financial position is in no way similar to any other person. What they might think is a perfect investment for them can turn out to be the worst investment for you. You should make your own decisions after carefully analyzing your financial condition and determining what you stand to gain and lose.

If you are passionate enough about investing in the share market, you should consider following these trading tips as it will help you to build wealth without losing much money.