Updated: Feb 2
Money Making Hacks by Jasmeet S Anand Vol 7
Money Making Hacks by Jasmeet S Anand Vol 7 Often, New entrants are found confused on how to trade in stock market? There are views which...
So here are the techniques used for trading on stock market:
1. Long Term investing
Most common advice, We get is invest for long term. Which means, Do a deep research on a stock or a company and buy the shares of the company. Become a long term partner.
Long term investing is, buying a share for above one year in technical terms.
This requires minimal overlooking of the portfolio. You just buy a share and hold it for years. This pays awesome returns if invested in right company stock. This attracts lower tax rates.
Low churning of your money helps you save taxes and brokerage as well.
Only downside is that If the company does not do well or the stock does not move up in years, You may lose to ride the wave upside on the index.
We all have heard stories of how grandparent bought shares worth few hundreds of MRF or TATA years ago and when the same was inherited by the grandkid, It was worth few millions
2. Short Term Investing
Some smart ones, who do a lot of research and basis the fundamental and technical researches, They reach on short term expected price of a share and trade. This can be ranging from couple of days and few months.
When there is a news on a particular stock and the news is expected to impact its price in short term, Ones who want quicker money, buy or sell it for short term.
Short term investing attracts higher taxation than long term investing.
Any trade which squared off on less than one year is considered to be short term investing.
These are investments which are expected to give good returns in short terms. The same money can be invested and reinvested for higher gains. A little investment gives multiplier effect by reinvestment in the stock market.
This involves close monitoring and active research on a stock to trade.
Flip side is, If the investor does not have a holding power and the stock goes down, I may lose. Or, the News basis which the investment was done, did not come true, The stock may not do well.
A large community of investors belong to this category in stock market.
3. Intra day Trading
These are the traders who do not invest too much money, and play on same day buy and sell philosophy. This needs a lot of research and close monitoring of the trade as well.
Every single minute counts for the intra day traders and these traders play on large volumes and thing margins.
Buy in the morning and sell before the session ends, or Vice versa.
A lot of risk is involved, as predicting stock market is no ones guess ever.
The ideology the intra day traders work in to cash on early news or small movements upward or downwards.
This attracts high taxation than long term investing. The percentage brokerage is high as the volumes are high and margins are thin.
Very informative and people with high risk appetite are advised to be here.
4. E- Margin Traders
This a a calculative class which leverages on their existing portfolio and trade on e margin. Basically, the bank or brokerage firm fixes a limit up to which the trader can buy or sell without having money in the account. This attracts interest on the amount utilised. The interest varies between 12 to 18 % depending on the agreement between the parties.
This gives the trader a comfort of having money when needed and the same helps in holding the shares for little longer if needed.
This is as good as running a business on loan. A smart investor knows how much to leverage and for how long. The risk is that this easy available money at times increases the risk appetite resulting in larger losses than ones pocket.
5. Derivative or FNO Traders
Derivative as name suggests is derived from the present value of the share. This is slightly technical as the trader is dealing in future value of the stock.
There is contract between a prospective buyer and prospective seller of a particular stock. Where in some one promises to buy a share at a price if it reaches the agreed value at the end of the contract.
Future as is understood, is the value agreed for buying or selling at agreed price in future. Where as options are a little technical ones and only experts are advised to be trading in options.
Option trading can really work like a two edged sword. Be careful before getting Into option trading. Have a mentor or attend few classes on same before start. Start small is the only advise I have for new traders on options.
These are five broad techniques for trading in stock market. I hope this helps some of the new traders and investors.
Stock market has a room for every one, right from a small trader to some one with large appetite. From a novice investor to seasoned one.
A place where you can enter with Rs. 100 to make millions and if one does not invest/trade prudently, It can work otherwise. Be prudent in trading and investing!
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