Friday, 9 July 2010

Stock Market Trading, the things should be considered.

One the best methods of making money or profit through online or offline are stock trading. Buying and selling the shares of companies, which are listed in the stock market and earn a profit out of it is stock market trading. There is a high chance of risk also in the stock exchange trading. If you are not vigilant and experienced, instead of making money all your investments may be vanished within no time.

In this article I wish to explain the things you should do and should avoid when you try to make money from stock market.

Learn stock market and individual stocks well before investing. Read more related articles, books and all available information to get knowledge about the stock you wish to purchase.

Avoid the shares of companies which have an important role in fixing the consumer price index, that is, the companies which are large players in the country’s GDP.

Do not follow blindly the stock brokers, or the financial Medias and friends. Study well, do some homework and go ahead. If the money is not made in your mind you cannot make money from the market. So buy the shares only when you have a confidence in them.

Avoid the companies which have a lot of debt in their balance sheet. An easy way is that check any large amount of debt in the current year balance sheet. It is not easy to overcome that debt and get the company in a strong financial position in one or two years.

Do not make bulk purchase of the shares of one company. Widen your portfolio and sectors so that if one sector or one company goes failed you can compensate from other companies.

Select the companies which are paying high dividend and also check whether the dividend payout shows an increasing trend in last few years. Only a strong company can pay high and increasing dividend for years.

Select the companies which have a price earnings ratio is less than or equals to S&P 500 index's price-to-earnings ratio.( The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States.)

Do not stay more in one share if it shows a diminishing trend. Fix a stop loss percentage and disperse when it cross that border and at the same time do not wait for much profit. Fix a profit ratio and sell it off when it crosses the range.

Select the Leading companies which have a good record and have a good industrial leadership. The cost of such shares may be high and if you cannot afford such shares try for a company which has an important position within the same type of industries.

Select a company which has no strong competition. Such type of company can have a good financial position and the shares also fetch out more profit.
If you are keen with watchful eye you can reap a good harvest from the stock market. So wish you all the best and hope that you may conquer the stock market.

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