5 Stock Market Investing Tips

The stock market is one of the most profitable and promising investments there is and at the same time is also one of the most riskiest. Though many people have made lots and lots of money through the stock market, majority of the investing and trading population are on the losing end, some quit and never got their capital back and some are continuing to lose.

The difference between a successful investment or trade in the stock market to the one that went downhill has nothing to do with luck but rather implying some sound strategies that would reduce the risk. Many people consider the stock market as gambling and these people doesn’t know what they’re talking about, these are the people who either lost money in the stock market or will lose money if they get into the stock market.

In my not so long experience and exposure in the stock market, I came up with some strategies of my own that fairly worked well despite the bearish trend in the market. Here are 5 of my tips:

1.) Price action moves in patterns. I’m more into technical analysis than fundamental and most of my decisions are driven by looking and analyzing charts. History shows that price, no matter how long the time span is, moves in patterns and if you can spot several entry or exit points, take it. Though the market is unpredictable and doesn’t follow a particular flow, follow patterns would increase your odds in either investing or trading.

2.) Technical and fundamental analysis. Some people would prefer technical (just like me) and some would prefer fundamental. However, though I’m more on the technical side, I use both (let’s say I’m 60% technical and 40% fundamental). Technical analysis gives me idea of entries and exits while I use fundamental analysis to decide on stocks that I’m going to hold long. Fundamental analysis gives you a forecast of how the company is going to do in the next few months, years, or even decades. If you have patience to hold long, study more about fundamental analysis and it could give you significant gains in the years to come.

3.) Diversification. This is my hedge against the risk that I’m facing in investing or trading in the stock market. If you invest in just a single company, what if that company fails to meet your expectations and instead of growing, it lost some of its value? Diversification increases your odds of picking the right company and take some good gains. It will also cover your losses on some stocks that you picked that went down.

4.) Stick to your plan and if you’ll change your plan, change it for the better. Being an investor or a trader is not like being a gambler. A gambler comes in hoping to win or gain something without really any plan on how to do it, investors or successful traders plan and they work their plan. Having a plan means setting some price targets to take profits or tightening cut loss prices. It eliminates making decisions through emotions especially panic and greed. Most of the people who lost a lot of money in the stock market made decisions with their emotions (and I’ve been there too and good for me I learned my lesson fairly well) and basically went it without any concrete plan.

5.) Keep on learning. Investing or trading in the stock market requires some skill. It is an art and it is scientific. Learn the candlestick patterns and reading/analyzing charts, learn how to read financial statements and computing a company’s intrinsic value, and keep yourself updated with the current events as it influences the stock market highly. Knowledge is our greatest asset and it could spell the difference between earning or losing a lot of money.

The stock market is a fairly simple and very rewarding endeavor. However, do not underestimate it and think of it as some sort of magic wand that would give you riches in an instant. Hard, smart, and consistent work always pays and if you’re equipped with the tools on how to deal with the uncertainties beyond our control in the stock market, our chances of gaining will improve drastically.