Basic Rules of Stock Market

 

Basic Rules of Stock Market

• Own capital
• Be strict with your stop loss
• Learn whenever you suffer a loss
• Avoid greed
• Avoid leveraging
• Don't act if you are not sure which way the stock markets will move
• Remain patient and disciplined, whatever the market condition

Own capital: Never take a loan or borrow money from a friend to trade in the stock market. Many times I have seen that people borrowed money or took loans from someone on high-interest rates and then lost capital.

Be strict with your stop loss: It means when you are losing money, cut your losses and get out of the market. Similarly, if you are on a winning spree, setting a proper stop loss will protect your profits when the stock markets start going down.

Learn whenever you suffer a loss: We lose money in the market due to our mistakes. Find out where you went wrong and ensure you don't repeat it.

Be disciplined

Once you have developed an investment strategy and identified companies worth investing in, stick to it. Once you have decided on a target price and a stop-loss - stick to it. Once you have decided on how much to invest, and at what pace - follow the plan religiously. When it is your money on the line, the market volatility will set your emotions racing, it will be difficult to stick to your plan in the heat of the moment - but trust the decisions you had made with a calm mind. As the saying goes - get out of the kitchen if you can’t stand the heat.

Invest only the surplus

Remember that the markets can be ruthless and take away every paisa you invest in it. So, you should only invest what you can afford to lose. Make sure you have sufficient low-risk investments before taking on anything with considerable risk.

Don't act if you are not sure which way the stock markets will move: In such instances, it is better to be a passive onlooker instead of participating in the market action.

Hedge your positions:

Any economic or political event may shake the market. Therefore, it is important to hedge your positions.

Diversify your portfolio

Among the most important ways of keeping the overall risk under control is diversification. Diversify both in terms of assets and instruments. Remember the adage: don’t put all your eggs in a single basket.

The stock market is a risky business and one must take necessary steps to prevent any mishap. Patience and disciple are very important in order to earn from the stock market. If you are not following rules and blindly trading then it’s basically gambling. One such mistake could cost you a fortune.

I have been trading in the stock market for a while with help of Eqwires. I have been closely following their trades and observed a few precautions they take and have applied the same to my trading. I follow these rules no matter what to avoid getting in any trouble. These rules have helped me a lot when I was new and I hope they prove useful to you as well.