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Ever since you have learnt about the stock market, you have heard people either lose their money or generate profit.
When you hear about investors and traders profiting from stocks, doesn’t your mind desire to profit from the stock market?
It does, but your fear prevents you, doesn’t it?
Does it make you wonder if you have what it takes to make a profit on the stock market?
If it does, you are not alone. Like you, many people are skeptical about many things, such as whether the price of a stock will fall after they purchase it or whether they should wait longer for the price to fall.
Random thoughts like these can make you doubt yourself.
Let me tell you, the sooner you get past these obstacles, the clearer your mind will be.
What if we told you that the best way to overcome self-doubting thoughts is to start exploring the stock market by investing a small amount?
Making a small profit from the stock market is so simple that anyone can make a profit. From Warren Buffett to your next-door neighbour, everyone is profiting from the stock market.
All you need is a basic understanding and discipline to make a generous profit in the stock market.
Earning money in the stock market begins with planning and putting your skills into action. There are numerous ways that you can make a profit in the stock market.
We will start by explaining the most basic method for profiting in the stock market, and then we will go over other ways to turn your investment into substantial profits.
Making money in the stock market starts with fostering disciplined habits that control your emotions from making impulsive decisions. Becoming successful in the stock market comes with achieving small things.
Instead of eyeing the bigger price, you should start small and gradually turn your small investments into one big, substantial profit.
When you plan to enter the stock market, the first thing you need to do is study the stock market. Understanding the landscape and mechanism of the stock market is crucial for generating profits.
Once you understand the stock market basics, you can use this simplest method to make a profit.
Buy, hold and sell is the simplest way to make a profit in the stock market
Identify a stock that has potential growth. Purchase the stock at the current price and hold it until the price of the share rises. In the long run, the price of the stock can outperform market fluctuations.
Therefore, simply purchasing a stock of your choice at a lower price and selling it at a higher price can earn you a significant amount of profit, especially if you hold it for the long term.
Historical reports of the stock market indicate that this way of investing is highly rewarding in the long term.
The trickiest part is identifying when the stock price is at its lowest and highest levels.
Like any other trick, the secret to identifying the stocks with potential is to analyse the fundamentals of the business, review financial performance, and look for new developments.
Making profits in the stock market involves a combination of fundamental proficiency, technical skills, and emotional discipline.
Gaining knowledge of the stock market’s foundations will help you understand the asset’s performance and potential. Technical analysis will help you identify the right entry and exit points. Then your emotional skills will determine whether you can make informed decisions or not.
This method is a long-term strategy that may take days or months to generate a profit. So if you are looking for consistent profit every day from the stock market, this method may not be suitable for you.
However, if you are looking to earn consistent profit from the stock market, then you should keep reading to find out what is in store for you.
The stock market can be highly rewarding when you make informed decisions. Since the buy-and-hold method may not yield potential profits in the short term, there are other means to generate profits in short intervals.
In addition, other types of long-term investments can yield more profits than the simple buy-and-hold method.
Stock market investment is driven by financial goals, which are categorised into short-term, mid-term, and long-term investments. So the nature of achieving these goals varies.
Careful planning of your financial goals and assessing your financial situation can help you earn money from the stock market.
The two popular activities in the stock market are investing (for long-term goals) and trading (for short-term goals). Both trading and investing in the stock market help you achieve financial freedom by making informed decisions while investing and trading.
Here are some of the strategies you can use to multiply your profits through investing and trading.
Investing is the process of purchasing shares, bonds, and other securities for the long term. The historical report of shares, ETFs, bonds, and other securities has shown significant growth in the long run.
So making long-term investments is an excellent way to achieve financial freedom. Meanwhile, investing for the long term can be tiring for some with the requirement of analysing the charts, the performance of the company and other factors. While for some this can be entertaining.
As a result, a variety of investment strategies are developed to meet individual needs. Here you will find different long-term investment strategies that can grow your wealth.
A mutual fund is a pool of securities such as equities, ETFs, debt funds, index funds, bonds, and others. Investing in a mutual fund involves buying a pool of securities from various asset classes. Mutual fund portfolios are managed by experts on behalf of the investors.
SIP investment is known as a Systematic Investment Plan, which is a systematic plan that allows investors to invest a predetermined amount at regular intervals.
Investing through SIP has the potential for the investment to grow through the power of compounding and take advantage of the rupee cost average in the long term. You can also automate your payments into SIP for regular contributions.
Unlike SIP, you do not need to invest regularly in a lump sum. Lumpsum investments in mutual funds are one-time investments that involve investing a substantial amount at a single time and allow the investment to grow over the long term.
Lumpsum investments yield better profits when you invest when the market is in a downtrend. This will give your investment immediate exposure to capture the market’s upward movement when it rises. However, lump-sum investments will cost you lower transaction fees.
Dividends are payments that businesses make to their shareholders on a quarterly, monthly, or annual basis. Reinvesting the dividends to purchase more shares can benefit from the power of compounding.
Investing in dividends can help you create wealth by providing you with consistent cash flow. Regular income from dividends can offset your losses. Dividend-paying indicates the business you have invested in has strong, predictable cash flows and a stable business model.
A diversification strategy is the process of spreading your investments across various classes of stocks, such as large-cap, mid-cap, and small-cap. Diversification is not limited to stocks.
Like mutual funds, you can personally choose to invest in various securities based on your financial situation and investment goals. Diversification is a great way to mitigate the losses during the fluctuations.
An initial public offering is when a company issues shares to the public for the first time to raise capital. When IPOs are issued, investors can buy them at the issue price before they are listed on exchanges. However, due to high demand, IPOs are frequently listed at a premium to the issue price, allowing you to profit from the listing.
Although, you can also hold on to shares of the invested company if it has strong fundamentals for potential growth in the future.
IPO subscriptions are available on various platforms, where you can apply and pay a premium price to book the slot. If you are qualified for the IPO, you will receive the shares on the proposed date. You can choose to hold or sell the shares on listing day.
Trading is slightly more complex than investing. While you can invest by conducting a fundamental analysis of a business, trading concentrates on a share’s technical features. It involves studying charts, technical indicators, candlestick patterns, chart patterns, and others to determine the right entry and exit points.
Although, all of these may sound complex, they are not impossible to learn. Before you begin your trading journey, you should understand the concepts behind trading. A comprehensive understanding of trading may help you make wise trading decisions.
Unlike investment, trading requires you to be more engaged with the charts and evaluate your best positions to take a trade. The best thing about trading is you can make quick profits within a day. Moreover, there are numerous profitable trading strategies.
Success in trading requires a disciplined approach, effective risk management, and a deep understanding of technical analysis and trading strategies.
These are some of the strategies you can incorporate into your trading plan as per your trading style and preferences.
Intraday trading is a trading strategy where a trader buys and sells securities within the same trading day, aiming to profit from short-term price fluctuations, which requires the use of specific techniques and analysis to identify entry and exit points within the selected time frame.
This method of trading is actively carried out throughout the day, aiming for short-term profit-booking with a target of “stop at 1% profit a day” or “three trades per day” set according to your trading strategy.
Intraday trading can significantly multiply profits, but it can also incur losses. Therefore, integrating risk management decisions such as risk-reward ratio, stop loss, and take profits is crucial to mitigating losses.
Swing trading is another trading strategy that focuses on capturing the potential of short-term trends. In this trading strategy, traders usually buy a share from the share market before the trend begins, hold it for a few days or weeks as the price rises, and then sell it when they make a profit.
This strategy is excellent for generating profit from short-term fluctuations. Traders can use trend-analysing indicators like Bollinger bands, RSI, moving averages, and others to predict price movements.
Option trading is different from any other form of trading strategy. Because option trading is not performed in direct stocks like other trading methods. Instead, orders are placed on derivatives of stocks and others as a contract to purchase or sell when the stock rises or sell when the price falls at the predetermined time.
Option trading involves a trader signing a contract with the seller in exchange for a premium, with the obligation to buy or sell the stock at a predetermined time, depending on the nature of the option contract selected.
Option trading is carried out in various derivatives, including NIFTY, Sensex, and other derivatives. Given the nature of the approach, option trading has a high risk-reward potential. You must be cautious and implement risk management decisions when doing option trading.
Intraday scalping is a more intense trading strategy than regular intraday trading. This trading strategy involves placing and executing multiple trades in a smaller time frame to capture the profits from minute price fluctuations.
This trading strategy allows for quick profits while limiting market exposure. This trading strategy requires a thorough understanding of technical indicators to execute trades successfully with timely entry and exit positions.
On the other hand, tight risk management is essential to controlling losses on each trade to maintain disciplined trading.
Algo trading, also known as algorithmic trading, is a revolutionary trading strategy that minimises the human touch to regulate trading data.
In this trading strategy, traders have to develop an algorithmic formula by inputting commands based on their trading style. When the conditions are met, it automatically executes the trades without any human assistance. Traders can also test their algorithm on previous trading data for efficiency.
This trading strategy has transformed the entire trading landscape by eliminating emotional conflicts in trading decisions. It also executes trades instantly, reducing slippage as well as optimising transaction costs.
You can easily earn ₹1,000 in the stock market by investing as well as trading. In trading, you may need a bigger capital to earn ₹1,000 quickly. Whereas, you can invest as little as ₹100 and wait for the price to rise to earn₹1,000.
Yes, you can invest as low as ₹10 in the stock market by choosing small-cap stocks. Open a demat account and find stocks that are below ₹10. Invest in stocks with growth potential to reap the rewards.
The 7% rule states that you should sell stocks if their price falls below 7% of the price at which you bought them. This way, it helps to cut losses before it is too late. Following this is crucial, as our emotions may conflict, resulting in holding onto the stocks for too long.
Investing and trading are the two different methods to get profit in the stock market. Both of these trading measures require a disciplined approach, knowledge, patience, and risk management strategies.
While investing aims to achieve long-term goals by profiting from stock growth over time, trading aims to make short-term profits by capitalising on market fluctuations. You can either choose to invest or trade based on your financial situation and goals.
Investing is more risk-free than trading because it exposes you to fewer market fluctuations over time. Meanwhile, trading is riskier and has greater potential for rewards from a single trade.
Whether you are trading or investing, you can become wealthy in the stock market by adopting a disciplined approach and putting key risk management techniques into practice.
So before you start, understand the market principles and develop a solid trading plan and style to begin your journey in the stock market.
Disclaimer: The information provided in this blog is for educational and informational purposes only and should not be considered as financial or investment advice. Stock market investments are subject to market risks, and past performance is not indicative of future results. Readers are encouraged to do their own research and consult with a licensed financial advisor before making any investment decisions. The author and publisher are not liable for any financial losses or damages incurred from following the information provided in this blog.
Hashim Manikfan
Hashim Manikfan is a professional financial content writer with extensive experience in creating engaging and informative articles on a wide range of financial topics. With academic background in Communication and Journalism, Hashim has published numerous articles aimed at educating readers on essential financial principles. His work covers areas such as financial markets, investment strategies, economic trends, and more. His writing style ensures complex topics are accessible and interesting, making financial literacy attainable for a broad audience.
