If you are about to invest your hard-earned money for very good returns, despite the inflation. then the stock market is one of the best choices you have. If you don’t have the patience to wait and learn from your mistakes. Then stock market is not your cup of coffee. When you have a perfect analysis and approach towards the stock market, it will pour fortunes. But if don’t know what you are doing and gambling around, you might end up losing all. let’s see the major reasons for losing money in the stock market.
LEARN BASICS STOCK MARKET ANALYSIS
“Everyone has the power to follow the stock market. If you made it through fifth-grade math, you can do it.” – Peter Lynch
Learning some basics about the stock market is inevitable to make consistent money. Successful investors have a clear understanding of market fundamentals. They invest their money on the stocks only after a thorough analysis of it. There are two basic types of stock analysis: Fundamental and Technical analysis.
Fundamental analysis is a method of looking into the basics of a company at its financial, economic, qualitative, and quantitative factors. In simple terms, comparing the current performance of the company to its previous performances. So an investor could get an idea of whether the company is growing, falling, or stable. Technical analysis is a method of analyzing a future price movement of a stock by using historical data available of price and volume. Some stick on to either Fundamental analysis or technical analysis. While some analysts use both of the methods.
PRICE ACTION PATTERNS
“Buy not on optimism, but on arithmetic.” – Benjamin Graham
For a beginner, fundamental analysis might be a little complicated compared to that of Technical analysis. Fundamental analysis requires more data and time to analyze each stock. While the Technical analysis is quite easy to understand and quick to analyze. In this analysis, price and volume are represented graphically over time. Japnese Candlesticks are the most common representation. the price movement forms peaks and troughs which is technically called resistance and support respectively. Continous formation of support and resistance forms a pattern.
There are some Classic price action pattern
- Rectangle
- head and shoulders
- double top
- wedge
- cup and handle
- triangle patterns
Smaller price action patterns:
- pennants
- flag
- wedge
- saucers & rounding top
Smaller price action patterns appear for a smaller time. they appear halfway through the sharp price movement. A bullish trend is when the pattern breaks out at the resistance and move up. A bearish trend is when the pattern breaks out at the support and moves down. To confirm a breakout it is necessary to know the basic characteristics of volume.
BROKERAGE AND OTHER EXTRA CHARGES
For investing in stocks one should need a brokerage account. A brokerage account allows you to buy and sell stocks. Make sure to know the intraday, leverage, and cash trading charges. You can use a brokerage calculator for calculating the gross and net profit. Also research about the credit and debit charges of the brokerage you use. In intraday trading, make sure to close your trade before (or) on time, otherwise auto square off charges will add up. The above-mentioned charges might eat your profit (or) add more loss in your trading if you are not aware of it.
LEVERAGE
Leverage is nothing but the money lent to investors by brokerage firms for trading. Investors can use leverage and invest in more stocks with less amount from their hands. The brokerage firms charges for the money lent. beginners are not recommended to use leverage before understanding and experience. Using leverage could boost up your profit. At the same time, there is a probability for severe loss from your principal amount, in addition to the leverage charges. If you are very clear with your analysis and able to manage your loss if things unfortunately, go opposite, then you can use it. Until you get the confidence and understanding its better not to use it.
DISCIPLINED TRADING
“We don’t have to be smarter than the rest, we have to be more disciplined than the rest.” – Warren Buffett
If you want to be successful trader discipline is mandatory. If you are not disciplined in trading, you might be out of the market in a short period.
- Always trade with stop-loss. Stop loss helps you get out of losing trade with minimum loss.
- Never revenge trade.
- Don’t trade based on other’s suggestions, you can select stocks from suggestion but before trading always you put your own time to analyze.
- Always trade with surplus money. Never trade with borrowed money if you cant manage losses
- Trading with proper analysis is best, don’t gamble
- learn from the mistakes, don’t hesitate to learn
TRADE LIKE A ROBOT
“Individual who cannot master their emotions are ill-suited to profit from the investment process.” – Benjamin Graham
The stock market movement is based on human emotion. Try to understand herd psychology. Don’t get panic. Many investors have loosed so much of their money due to the inability of controlling their emotions. Have realistic expectations on your returns. Greed and fear are two major factors that stand before your success. Try to trade like a robot.
investo 
Nice tips Sarves
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thank you for very informative …and motivational content..
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