The most thrilling part of trading business is investing in stock market. You can enter in to stock market in two ways either directly or indirectly. If you investing through a third party broker it is the indirect way of investment and if you buy the stock of a company directly and become the share holder of that company then it is the direct way of investment. You can choose your method as your like. Indirect way of investment is comparatively easy than that of direct investment. If you can be little mature and you are ready to handle the situation with patience definitely you can win in the stock market. Above all you should have enough time to spend in market as well as to gather the knowledge from the market. It is not so difficult because the information is available in the very finger tips of you. So you can easily avoid the myths and adapt the truth. Some basic things are there that you have to follow when you are trying to make a foundation stone in stock market. They are,
- Must know that you are become a part of the particular business that you are planned to buy or invest.
- Should keep a tool which is able to analyze all the factors regarding the company.
- Should be alert with the market.
- Should have a clear idea about what you are going to buy.
Many people refer the stock market as gambling. Actually the stock market is a reflection of the economic status of a company. That is why the economist refers the stock market as barometer of economy. Stock market will be gambling only when someone enter in to the field without proper understanding. So the success will depend only on your luck. The lack of knowledge about stock market will lead you to depending on others or imitating others this is reoffered as herd mentality. The people who show this behavior has a tendency to buy or sell the stock by following others. That is why experts say that should have clear idea about the company in which you are investing.
Majority of the traders thinks that investing in stock means investing in the market, it is fallacy. Actually you are investing in stocks not in the market. That means you are investing in the equity shares of a company. Once you invest in the share of a company you become the share holder of that particular company whose stocks you are buying. By this you become the owner of a small part of the company. So the losses and profits that the company suffers become a part of you. So you should collect the information regarding the company. It will help you to have a deep knowledge about the performance of that company.
Evaluation of the value of a company is a very difficult task because if you are going to evaluate a company many factors are there to analyse. One of the main factor is climatic changes, other factors includes monsoon, political scenario, changes in the management of the company, natural calamity and many more. So calculate the subtotal of these factors are too difficult. It can be easily calculate by the PE ratio of the company. PE ratio is a prime factor that you should know while you invest in stock market. It is a most widely used tool for stock selection. PE ratio is calculated by dividing the current market price of the stock by its earnings per share (EPS).
So make sure that is it possible to get a huge profit over your investment that the company promising you. Company with high PE ratio has typically high growth. So it is enough to find the value of a stock or company in which you are going to invest. If you give your ear to all the factors for your surroundings you will be in dilemma and can’t be find a good decision so it is an easy way to find the value easily. Another method is beta analysis. Don’t be fear by hearing the name. We are familiar with the word beta. Actually it is a Greek term. In investment, beta indicates whether the market is more volatile or less volatile with respect to the whole. Now a day’s major stock data providers gives the beta at the same place were the PE ratio is shown. In other words Beta is a kind of risk indicator. The company with high beta is able to give high profit as well as high loss. So it is better to invest in a company which has low beta value. For a fresher low beta company is better to invest. So this can also be used as a tool for stock market investment.
Investing in stock market is very difficult task for a fresher. If you ask to a person he never invest in stock market you will get the answer like the “it is very difficult and can’t understand easily”. Similarly if you ask a person who is already invested in stock market will say the same. It is the human nature they try to think that they know everything after doing something one time it might happen the people tries to make their personal financial status so they try to make it in the best way as they can but it seemed as difficult for others.
You should be able to give more attention to the market. If you want to buy a stock, then you have to know the worth price for buy the stocks which is enabling you to make profit. It is necessary to study the market. Otherwise try to take an advice from the person who has sufficient experience in this field.
For a safe trading you have to know what the stock you are buying or investing. You can reduce your huge loss by investing in the stock of a reputed company because only a reputed company can give you enough income. So try to know about it very well before you buy the stock.
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