Before you start trading the stock market, consider carefully whether it is worth your time and money.
Since you are going into the stock market, most likely you are planning to get a higher return for your money which should be better than what you would otherwise get by investing it into mutual fund or fixed deposit in the bank where return are almost guaranteed.
Well, how can you achieve such return? The answer is simple and well known: buy low, sell high. If you do it most of the time you’ll be a successful trader. But the first problem is how do you know when to buy? There are probably several ways to do it. Let’s assume you know and the stock went up after you bought it.
Another problem is when to sell? After the stock went up by 20%, what do you do? Sell now, or wait until it is up 50%, 100% or 200%? Do you listen to news and do what everybody else does – sell, buy more, or continue to hold the stock? If you choose one of the first two options, how much should you buy or sell? Or if you hold the stock, are you sure it will continue to go up, or you may end up waiting until the stock price falls back to its original value and lose all the profit.
The truth is some people do know the answers to those questions and make profit consistently from the market. The question is, are you as good as them? Majority are losing money guessing and trying to time the market.
If you are new to stock trading and not planning to spend much time on education and research, chances are you will lose. You will be competing with professional traders, big players and insiders who profit immensely from the 90% who keep losing.
Some may argue: I had that stock, I sold it when it was up 20%, but if I did not sell it at that time, now it would be up 300%. How stupid I was when I sold it. If I did not, I would have made a lot of money. I have to do it again. It shows and proves that I can make a lot of money and it’s easy!
That is right you can make a lot of money, but it is not that easy as it seems. Let’s assume you did not sell the stock at the time it was up 20%. Then what makes you think you would wait until it is up 300%? You may have sold it when it was up only 25%. Or it may go down and you sold it with a lower than 20% profit.
The bottom line is it is easy to look at the past and see all the mistakes you’ve made. Unless you know market trends and technical analysis well,most likely you will not be able to make profitable trades. If you are not a professional trader or not planning to become one, your best bet would be to invest in mutual funds or your own business.