We always had a financial advisor to do our investing until several years ago. A person who feels negative about the market is called a bear,” while their positive counterpart is called a bull.” During market hours, the constant battle between the bulls and the bears is reflected in the constantly changing price of securities. At the same time, you should establish the point at which you will liquidate your holdings, especially if your reason is proven invalid or if the stock doesn’t react as expected when your expectation has been met. To succeed in investing or trading in the stock market, you have to read, practice and read more.
Unless you are purchasing an exchange traded fund (ETF) , your focus will be upon individual securities, rather than the market as a whole. There are few times when every stock moves in the same direction; even when the averages fall by 100 points or more, the securities of some companies will go higher in price. You should understand how fundamental” and technical” analyses are performed, how they differ, and where each is best suited in a stock market strategy. You can read a book once and think you understand it. Then go into the market and forget everything you read in that one book.
Know the difference between market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders, and other types commonly used by investors. Experienced investors such as Buffett eschew stock diversification in the confidence that they have performed all of the necessary research to identify and quantify their risk. The stock of two other companies (C & D) in a different industry are up 10% each, while the fifth company’s (E) assets were liquidated to pay off a massive lawsuit.
In other words, if you wanted to buy 100 shares of a stock trading at $100 for a total cost of $10,000, your brokerage firm could loan you $5,000 to complete the purchase. Suppose the stock moves to $200 a share and you sell it. If you had used your own money exclusively, your return would be 100% on your investment ($20,000 -$10,000)/$10,000. If you had borrowed $5,000 to buy the stock and sold at $200 per share, your return would be 300 % (20,000-$5,000)/$5,000 after repaying the $5,000 loan and excluding the cost of interest paid to the broker.
Suppose the stock fell to $50 per share rather than doubling to $200, your loss would be 100% of your initial investment, plus the cost of interest to the broker ($5,000-$5,000)/$5,000. Investing in the stock market is a great opportunity to build large asset value for those who are willing to be consistent savers, make the necessary investment in time and energy to gain experience, appropriately manage their risk, and are patient, allowing the magic of compounding to work for them. One should really learn the basics and the ins and outs of investing in stock market. This is a good advice for those who would want to go into stock market investments.