The Pros And Cons Of Share Trading

991 Words 4 Pages
Share trading is considered as one of the most risky ways of earning money in short time because it requires skills, knowledge as well as luck to be successful trader.
Share trading can be bifurcated into three categories Investors, Swing traders and Intraday traders. Investors are the one who follow fundamental analysis and invest in company having strong numbers. The fundamental analysis includes P/E ratio, EPS, Debt to Equity, Interest Coverage Ratio etc. Investors hold shares for a long term ranging from 3 years to 10 years. We have lots of example of successful investors who have taken share trading as a profession and became billionaire such as star investor Rakesh Jhunjhunwala, Radhashankar Damani etc.
Swing trading and Intraday trading
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Never lose more than 10% of your investment
Do not stick with weak stock. Capital Protection is very important for trader to survive in share market and if you find your invested stock is falling beyond 10%, exit from it straightway. Also the key to success is a stop-loss order. Stop-loss restricts your losses at certain level. Suppose you are buying a share of Rs.100 and set a stop loss at Rs.95, than as soon as the share price hit Rs.95, the share would be sold automatically and your looses would be limited to Rs.5 only. While entering in a trade you must decide the amount of loss you are willing to take.
Another important rule is to exit from your positions if you brokers calls and asks for more margin money or cash due to reduction in stock price. Share trader should never average out and become involuntary investor. He should rather book losses and wait for the right time to enter again.

5. Always keep cash reserve
Market keeps providing opportunities to buy quality stocks below their fair price but you can take benefit only if you have enough money. On 24th August many quality stocks nosedived and gave window of opportunity for share trader to earn handsome money. This opportunity was grabbed only by the traders having enough cash reserves. Few of the stocks were jumped as much as 30% within few days such as YES Bank made low of Rs.590 on 24th August and currently it is trading at Rs.770. But do also remember, if you miss a good opportunity, don’t worry market will give another

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