A few years ago, the share market trading was an opaque and extremely confusing process that took many months to become familiar with. Most share brokers would not allow their clients to start making trades in the share market until they had met certain criteria and completed a series of paperwork.
The Truth about Trading in Share Market
This was all well, and good, but the whole system seemed to be based around the notion that the share market was a technical item.
The truth of the matter is that it is an insurance market, where the risk is divided into two parts. It’s where you put your money up for someone else to either cover themselves should you lose it or earn an income on it.
There is much more to this than meets the eye, so we will continue with the technical area of the market. When we speak of profit in the market, we are referring to the “return” that you get from selling shares on the share market.
Tips for Buying Shares
It’s not just the price of the share that matters. The type of share you buy and the fact that you bought it are as important as whether it’s a good bargain or not. There are several factors that can affect your profit in the market – but the biggest one is how long you hold the shares you have bought
- This means that you need to understand the psychology of buying shares on the market. Of course you want to make a profit but you also want to keep them around for a while to enable them to appreciate in value over time.
- You’ll notice that the shares which rise are ones that haven’t got the opportunity to appreciate in value because they haven’t been “on” for very long. So you need to avoid holding them for very long. At the same time, you don’t want to sell them too quickly.
- Staying out for a short period and then immediately selling (and “shorting” the shares) is more risky than holding them for a while and waiting for appreciation. In fact, when you sell your shares at the end of the day, you should consider buying more shares to offset any losses.
- It’s only when you have put your shares on for a long time that you really need to get rid of them to “get rid of” the risk. By that stage, you’ve already made money on them!
All this could make you think that the stock market is like a casino: you either win or you lose. In reality, it’s a little bit more complex than that. However, there is always the possibility of winning – and being a winner in the stock market is something that every trader wants to achieve.
If you want to make sure that you achieve that goal, then you need to do some work with the market before you invest. Start by doing some research into the different companies in the market. See how the share prices react to all the different things happening in the market.
Try to work out what makes each company a good investment and what makes it a bad one. You may find that you can make a fortune out of some of the stocks in the market, whilst losing a fortune on others.
To summarize, the more shares you buy, the more you should “get rid of” when you get them for a long time. The fewer you buy, the more you should get rid of if you have held them too long.
This does not mean that you should only get rid of the shares that are making you money, but rather those that are not making you money.