Stock Market
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The stock market is a good place to invest. Yet, we cannot ignore the fact that the stock market is indeed a volatile entity. No one can exactly predict how the market will behave tomorrow. So, the key to successful investing lies in having enough knowledge. Thus, this article will try to explain what kind of knowledge is essential for stock market investing. We shall discuss what are the things one must know to emerge successful in the stock market. Without losing time, let’s start looking at them one by one.

Know what kind of an investor you are 

This is the first thing an investor should be aware of when he makes a share market investment. The share market holds a lot of potential for various kinds of investors. Several types of securities are traded on share markets. So they provide opportunities to implement different trading strategies. In fact, most of the investors you see in stock markets follow independent trading plans. Each of them usually has a unique approach of his own. It is important that you first figure out what kind of investor you would like to be. The approach you follow will decide your trading plan. 

According to your financial goals, you can decide what kind of investor you want to be. In addition, based upon that you will have to use different trading strategies to achieve your objectives.

Knowledge of Stock Market

Once you decide what approach you will follow, start learning about the stock market. You must know how it exactly functions and how to make a suitable share market investment . Your aim should be to gather as much information as possible. There’s no end to learn stock trading. However, investors must try to develop a good understanding to begin their investment journey. First of all they should know about the various kinds of securities that are traded. Here’s a quick glance of the essential terms you must be aware of.

  • Stock exchanges: The stock market is basically a network of stock exchanges. Exchanges are marketplaces where trading takes place. They connect the companies with the investors. Companies list stocks on exchanges. Then the investors trade for them.
  • Ask: It refers to the price at which people wish to sell their securities.
  • Bid: It is the price investors agree to buy the stock for.
  • Ask-Bid Spread: It is the difference between the bid and ask price of an asset.
  • Bull: It suggests a scenario where investors anticipate the prices to go up.
  • Bear: The market condition where investors expect a fall in prices.
  • Capitalisation: The total market value of a company.
  • IPO: Initial Public Offering which is the first issuance of shares by a company.
  • Stockbroker: A firm that facilitates stock market investing by providing investment accounts and other necessary services.

Types of Securities 

There are different types of securities in the share market across the globe. When you set out for a share market investment, it’s crucial that you have a sound knowledge of every asset class. Each kind of security has a unique set of properties and characteristics. It is important to understand them to make appropriate decisions. The trading strategy for each of them differs. You cannot invest in each of them with the same approach. As a beginner, you must know about these common types of securities.

  • Stocks: Stocks give partial ownership in companies. While common stocks give dividends and voting rights preferred stocks don’t. Stocks are again divided into categories based on different parameters like market capitalisation, industry sector, etc.
  • Bonds: Fixed-income instruments issued by companies to raise money from investors. 
  • Derivatives: Contracts between parties that derive their value from underlying assets like stocks, commodities, bonds, cryptocurrencies, market indexes, currencies,etc. 
  • Mutual Funds: Offered by financial firms where investors pool their money. It is reinvested in different other securities.

Trading Strategies and Techniques

Broadly speaking, you can either follow a long-term approach for investing or trade for quick profits. Investors who wish to obtain profits in the long run usually invest in stocks which have a stable performance. They make a share market investment that will yield good returns in the future. Their aim is to gain from capital appreciation of securities. On the other hand, day traders look to take profits from price fluctuation of stocks.Their motive is to make profits in a very short period of time. To invest wisely, it is vital to understand these different strategies. Without proper knowledge you may make wrong investments.

    Moreover, there are a variety of trading techniques. Each of them is useful for different types of trading strategies. Day-trading, scalping, swing trading, breakout & reversal trading, and momentum trading are common ones. To implement these techniques effectively you must have a sound knowledge of all the things we discussed. You can easily learn them online. Firms like Share India have a well-designed knowledge centre. Visit the website to read everything about share market investing. All important topics are covered that shall help you immensely. In addition, their app for trading in the share market also provides a lot of resources to learn investing.

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