To –Do –List While Trading in Equity
Stock Market is not an easy subject that you can understand in just few days. Years of practice makes you perfect. You need to follow certain rules and strategies in order to know the nature of market. However, these days, there are large number of tools that allows you to gauge the market. Everyone should follow these basic rules of stock market.
- Focus on Price
You must follow a very different set of criteria. Veteran traders focus on a single consideration: price. This may be a poorly run company but, if conditions call for a brief improvement in its price, it is a good buy for the trader who knows when to get in and when to jump out for a quick profit. On the other hand, a great company will sometimes climb out of its comfort zone to a price where suddenly there are more willing sellers than buyers. If price is about to fall, then it is the short seller who will reap the benefits.
- Stay Liquid
When you are interested in this much more pragmatic view of stock market basics, then here are some guidelines to know about. Firstly the most important thing is that the stock has to be actively traded with at least 100,000 shares in daily volume. If the level is below than this then you run the risk of being stuck in a position simply because there are no traders on the other side. Another important thing to remember is that you should stick to tickers with a price below $50 simply as the liquidity requirements above that level become distracting for most traders.
- Never Try to Out-Think The Markets
Here is a scenario you have probably witnessed in the journey of trading. A company in a sector has a bad quarter, or maybe a product recall, and all stocks in that sector decline even though the other companies have done nothing wrong. This is illogical but that is how the market works. Same way, mediocre companies will go up in price when the market is hot as a rising tide lifts all boats.