If You Do Not Know These Basic Rules Then You Are Not Fit to Trade in Equities

Stock Market

Stock Market is very vast subject to understand. You cannot become a perfect trader in just a day or two. You need to follow certain rules and strategies in order to know the nature of the market. Each one of you must follow these basic rules of stock market.

  1. Price Factor

It is seen that the experienced traders focus on a single consideration: price. You can invest in a poorly run company but, if conditions call for a brief improvement in its price, then it is surely a good buy for you. Good traders know when to get in and when to jump out for a quick profit. In past, some great companies climb out of its comfort zone to a price where suddenly there are more willing sellers than buyers. If the price is about to fall, then it is the short seller who will reap the benefits.

  1. Liquidity Factor

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.

  1. Sector report can affect your stock

Here is a scenario you have probably witnessed in the journey of trading. Because of bad sector report, a company or maybe 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.

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