Investors get attracted to the stock market in the lure of earning good money. A well-managed investment portfolio is what it takes to earn money from the stock market. To grow money with continuous trading, investors need to build up a strong stock investment portfolio that has the potential to generate decent returns consistently for the long term.
However, equity is a volatile asset where returns are not guaranteed. But equity has the potential to provide higher returns than inflation-adjusted returns in the long run. You need to have patience and employ a hedging mechanism including stop-loss to minimise the losses.
Let’s see the ways to earn money from stock trading.
Method 1: Buy low and sell high using tactics
This is a straight and most famous strategy where investors take advantage of the extreme ups and downs in the stock market. When the economy is in a recession, prices go down, then buy at low and when the economy booms, it is the time to sell.
Investors need not to wait for recession to buy securities. They can buy securities at a low price and sell it at a higher price by using various tactics such as moving averages from price history. It is better for medium to long term investors. It is necessary here to keep your research strong to make an informed decision because it is not easy to determine the upside and downside time frames of a stock.
Method 2: Sell stock options
Options are the derivatives based financial securities bought or sold at a strike price i.e. pre-decided price for a pre-decided expiry date. It is necessary to exercise or sell your option before the expiry.
When you sell options, you collect upfront premiums from the buyer. If the options contract expires worthless, you will have the right to keep the premium amount.
Method 3: Short selling
Short selling means borrowing stocks to sell it with the intention of buying it back at a lesser price. You are going to sell stocks that you do not have in your Demat account. So, you are required to borrow stocks first. Here one can earn high returns within no time. But this is a highly risky zone.
Whatever strategy you are going to choose, you will need a Demat and trading account to trade stocks. Bajaj Financial Securities Limited (BFSL) Demat Account offers a flat brokerage rate per trade thereby helping you to save on brokerage costs and maximize your profit from trading. BFSL offers a state-of-the-art digital trading platform and a 100% paperless account opening process. The documents required for Demat account opening are PAN Card, identity proof, address proof, passport size photograph in digital form.
Follow the rules
Following are some rules can that help investors to grow their money in the stock market:
- Find out what kind of trader are you? A speculator or one who follows the fundamentals of investing?
- Avoid the herd mentality. As a potential investor, you can be influenced by acquaintances. Instead, you should rely on your own research and then invest.
- Have a disciplined approach for investment to generate higher returns.
- Always use your surplus funds instead of using the margin facility from brokers.
- Make trades for different holding periods using different strategies and analyze the results.
The Bottom Line
Traders need to balance their emotions. There is no place for greed and fear in the stock market. However, these psychological forces are hard to check for new players in the market. You need to recognize these challenges and take steps to cope up with them.