Share Market Trading & Investments

November 17, 2008 by  
Filed under Stock Market

Investing or trading in a Stock Market may offer a great amount of return and on the same time it involves a high level of risk and can ruin your hard-earned money. You may have heard of people who have made their fortune through Stock Markets and others who have lost their properties as well as money by trading or investing in Stock Markets. Before you think of entering into the world of Stock Market you should ensure that you have sufficient money available to meet your regular expenses.

If you are a person who can take high risk you can trade in Stock Market. Trading in a Stock market means buying shares and selling them within a short period of time or even the same day. If you sell the shares within few days or weeks it is typically known as “Short Term Trading” and on the other hand if you sell the shares on the same day when it was bought it is called as “Day Trading”.

Share Trading

Before you start trading in a Stock Market you should have a hands-on experience on how the stock market works, stock movements, risk involved etc. There are lots of books available on Stock market trading or some Stock Brokers also conduct classes on how to trade in Stock Markets. Apart from the general knowledge it is the Timing and Patience that would make you the real winner in Stock market trading.

There are many factors that influence the stock movement. It may be due to the overall market sentiments, specific sector news, specific company news etc. It is really difficult to predict the future stock movement. Stock movements are often predicted through Fundamental analysis or Technical analysis. Fundamental Analysis involves the process of evaluating a share based on its intrinsic value like liabilities, cash in hand etc. Technical Analysis is the process of evaluating a share based on its past performances through the usage of charts or graphs.

You can also buy a share based on both the analysis – Technical and Fundamental. But in reality it is hard to predict a stock movement with precision. A stock may have a good fundamental value but may be beaten down due to investors’ negative sentiments. History may not repeat itself. A stock could have made a particular pattern few months back but you can’t say for sure it would make the same pattern (technical analysis) in future.

Investment in Shares

Investing in Stocks may yield high returns while compared to other fixed investment plans. In contrary to the Stock Market trading, the stock investment means investing on a stock for a longer period of time (1 year and above). Your risk of loss is mitigated as you may be prepared to hold the stock for a longer time which may be a good period for that particular stock. Tax authorities in some countries offer tax exempt for Long term stock investments which means you need not pay taxes for the profit earned through your Investment. Long term investment in Stocks also has a drawback as you could have made the same profit within few weeks or months instead of waiting for years.

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