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Working your way to Financial Freedom through Stock Trading 2

 

 

In the last post I started with a brief preamble and went on to write about the benefits of stock trading. In this post we shall be concluding on that aspect and going on to elaborate on a few ways you can make your stock trading more profitable.

You can actually magnify your profits by trading on margin; this is an arrangement whereby the broker lends some percentage of the target size of the stocks to be traded to the investor after the deposit of a proportion of it by the investor as equity contribution. You do not have to have the entire needed cash to trade.

There are ways you can actually magnify your profits from stock trading such as by learning extensively about the market through economic analyst reviews reviewing economic indices and studying company financials. It is of utmost importance that you have a thorough knowledge of the stocks you intend to trade in. You also have to be abreast with prevailing news about the economy and various industries to be able to predict market moves. This also includes reading various authors on the subject.

You have to rid your self of all forms of emotions, such as hope or fear. Do not let your hope to make excessive profits get at you, as it could lead to loss of funds at the extreme. Emotions has a lot to do with ones success or failure at trading, being able to guard your emotions and trade objectively is key to success in the markets. To work successfully you have to discipline your emotions.  The market thrives on demand and supply and that is paramount to success in trading.

The knowledge of the charts is also very mandatory in the analysis of the stock market in that mastering technical analysis as it is so called will enhance your trading skills and hence, success if it is properly mastered. Charts and indicators are statistical representation of past market prices and trends and the periods it covers varies, some a month , a year, a week, a day etc. The one chosen depends on the trader’s trading preference.

Position sizing is necessary in order to determine how much of ones funds to be used on trading. As a rule of thumb one does not use money meant for urgent needs for trading. Money that should be used for trading should be extra cash on hand at trading time. One should also be wary of using margin when one is starting off to mitigate its effect on trading losses. One should be well experienced before using margin or trading on margin.      

Make sure you are trading active stocks: Trading none active stocks can result in you losing funds as such stocks would not yield any profits and be difficult to liquidate.

Money management is very important also in trading as cutting ones losses short and letting ones profit run may well be needed in trading the stock markets. This skill as a strong bearing on your being able to secure your funds. Avoiding a drain on your account means trying not to take profits early and getting out of a losing trade immediately and not hoping that it will turn into a profit. It is better to re-enter the market sometime later after getting out of a losing trade, when you are sure it is winning again.  

I would like to say that it is necessary that you do an in-depth study into the market, economy and stocks you want to buy or trade in to know it’s trend and also locate a very good, ethical and efficient stock broker who will guide you on you investment agenda for a floor trading but for the online you have to do relevant study as highlighted above in addition.

In addition, for risk averse investors you may want to venture into a safer investment in shares which is the long term investment for dividend pay out and bonus and rights issue, which is still higher yielding than other financial asset types.   As I round up on this I wish you a successful stock trading venture.

Disclaimer: Though the writer has made efforts to thoroughly research about the content herein, the reader should still make his/her own investigation before relying on the information therein.  Albeit results may vary from person to person as a result of levels of commitment, business type-personality fit, and domestic business terrain.

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