We know that stock market is such vast subjects that even the experts believe that they have just a little knowledge about it. Whether you are a novice trader or an experienced investor, you must follow certain basic rules of trading. Essentially, it is suggested to understand the basics strongly and have a nice command on it rather than running behind tricky tips as that may leave you confused. Here are some of the ideas that you must be familiar before making your first buy:
- Know about the Financial Metrics and Definitions.
You need to know and learn the definitions of metrics like the P/E ratio, earnings per share, return on equity and compound annual growth rate. Also, learn how they are calculated. Being a trader, you must also be capable of comparing different companies using these metrics.
- Practice Popular Methods of Stock Selection and Timing.
You must know how “fundamental” and “technical” analyses are performed. You must also know the difference between them. You also need to understand where each is best suited in a stock market strategy.
- Know Stock Market Order Types.
It is very important to know the difference between market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders, and other types. Such order types are commonly used by investors.
- Keep track of the Different Types of Investment Accounts.
You must know about the cash accounts that are most common but you must also know about the margin accounts that are required by regulations for certain kinds of trades. This is important to understand how margin is calculated and the difference between initial and maintenance margin requirements.