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How To Make Money In The Stock Market In 2012 - Fundamental And Technical Views Of Trading

By Edited Nov 13, 2013 1 0

Do People Make Money Day Trading

How to Make Money Through Share Market

First things first, if you find the talk of money boring and you don’t like the idea of spending a significant amount of time doing research and checking account statements then investing in shares or unit trusts is probably not for you.  If like me however, you find it a rather enjoyable experience to sit down and research a company to produce that all important “buy”, “sell” or “hold” option then read on.  From time to time investing is painful, there’s no other way of putting it. When you make your first proper loss you get a flux of emotions all at once and you will probably never want to touch another stock as long as you live.  This is coupled with huge amounts of joy when you check your trading account after a few days to find you’ve made money based solely on the decisions and research that you conducted – it’s rather like planting your own vegetables and then munching on the rewards later in the season.

The market for shares and bonds is a lot like the local farmers market held on Sunday afternoons, a place for buyers and sellers to congregate and make transactions.  You can find all varieties of produce from the run-of-the-mill items to the overpriced rubbish that seems to be this month’s new fad.  Just occasionally though there will be that item tucked away at the back that has not had its true value realised – it is these bargains that one should ultimately be looking to identify.

The price of a stock is determined a lot like the petrol at the pump.  If there is a lot of turmoil in the world and finding that all important fossil fuel is becoming difficult the supply of fuel is likely to go down and the demand for it is likely to outstrip the supply – leading to a price increase at the pump.  The inverse of this also holds, if for instance a large source of fuel has been found in a company’s back garden then chances are there will be an excess supply of fuel for the current demand resulting in lower prices at the pump.  Of course, things in life never seem as simple they first appear and the stock market is certainly one of those things.  It is important to bear in mind that the market does not necessarily act logically or reasonably.  The art of investment is not only being able to single out undervalued companies but being able to project the moods of the market and anticipate which stocks will fall in and out of favour with the current sentiment.

Share markets have become increasingly electronic based and the need for a physical exchange has become obsolete.  An interesting outcome of this has been that average Joe can now gain access to range of services that were available only to the rich and famous.  A service that is becoming more and more popular is the use of an “execution only” stockbroker.  By offering no advice these brokers can provide private investors with a cheap and reliable entry point into the market.  To give you a quick rough guide as to the rates of different services in the financial industry a wholly discretionary service might be charge an annual of around 3% of your portfolio value whereas an execution only broker would charge a flat fee or commission for each trade, typically around 15GBP or 0.7% (sometimes less if you hunt around).  It is important to make sure you research carefully which type or service is going to suit your needs.  Let’s say for instance you have limited financial experience and have come into a sizeable sum of money, putting it all into an execution only account is probably not the wisest thing to do and you should consider opting for the advice of someone who has worked in the industry through the ups and downs.  If you do decide to go for the execution only service there are a few big questions you should ask yourself first – Can I afford to lose all of this money and still live comfortably? Do I have other sources of income? Am I prepared to do the hard graft and crunch the numbers? It’s a little pessimistic but if you answer yes to all these then the world is your oyster and you can begin your investment experience straight away.

 As a parting note I will leave you with what a wise colleague once told me when I started my investment career – “selecting which competitors in a beauty contest are likely to stand out and catch the judges eye is the name of the game.   Not only should you appreciate the fundamentals but you should have an understanding of crowd psychology”.



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