What is the golden rule of trading?
Investing or trading in the stock market sounds both challenging as well as easy. It not only requires a disciplined approach, but also proper planning and a sound understanding of the market volatility. We all know there are no shortcuts to success in the stock market, however here are some golden rules that you may follow to land yourself in a position to gain excellent returns
TRADE FOR THE LONG RUN
The first golden rule of trading is ‘there is no shortcut to quick earning’. Investors should follow a process to reach their financial goals, which include financial constraints and a strategy that helps match your goals with those constraints. Different age investors may keep different investments. Younger individuals, for instance, may choose to invest majorly in equities or individuals in their early 50s or 60s may pursue with a mix of debt or equity investment.
TRADE WITH DISCIPLINE
The second rule of trading in the stock market being disciplined. An investor must follow the discipline approach to earn bigger potential profits. Trading with discipline will reward you with positive money flow and keep you safe from market volatility.
TRADE IN BUSINESSES YOU KNOW BETTER
The third rule of trading in the stock market is to know better what you owe. Trading can be risky if you put your money in a company which you have never heard of or a sector you know nothing about.
SELECT MORE THAN TWO OR THREE SECTORS
The fourth rule of trading is selecting more than two or three stocks to invest in industries that you understand. You should be sure your portfolio is not overloaded with stocks in a very small number of industries. By diversifying into various asset classes you can earn optimum returns on investment with minimum risks.
The fifth and foremost rule of trading is monitoring your investments timely and restructuring your portfolio in response to changes in the market volatility and macroeconomic conditions, based on stocks/sectors which provide an advantage to one asset category over another – or one stock over another.
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