Everyone enters the stock market with an idea of making a profit.
But how many are making it? Only quite a few lucky people make it.
Many have burned their fingers and lost their fortune by investing in the stock market.
It may be because they entered an area without proper strategy and their emotions overtook their decisions.
The important key to success is that one should stick to ones own strategy and should not deviate from the path even when they make initial losses.
Shares, as everyone knows is the riskiest form of investment.
Shareholders are the owners of the company and in case of making loss or liquidation they stand to lose.
So while investing in shares, one should consider the track record of promoters, the dividend paying history, its book value, price equity ratio and the balance sheet of the company for the preceding years.
Without studying any of these if anyone purchases the scrip based on its performance in the market and rumors, there is every chance, that the purchaser may make loses.
All who enter the market knows the above-described rules.
But with sudden spurt of emotions one forgets all these and enters into a contract.
Playing with emotion is gambling and not an investment method at all.
One should clearly understand his niche before starting.
Whether he is aiming at short term or long-term investment.
A day trader strategy cannot be applied to a long-term investor.
In case of long-term investors, there are two types of people.
There are people who pick up penny stocks during recession and wait for a rally during boom.
Others prefer high value stocks with good PE ratio and market capital and wait for its better performance during next financial.
Both the groups are likely to make profit.
Whereas, those who invest in mediocre stocks that are under performers always are likely to lose as they loose interest and their investment is depreciated as time goes.
Another strategy is to pick strongest in the weakest industry as the government will not let down any industry and will declare soaps to improve it and the strongest will snatch more opportunities.
In the case of investment in penny stocks, one should analyze the reason why the stock reached such a condition and the chances of its improvement.
In case of short-term investor he should select most volatile stock and book profit when he attains his margin.
He should work out his stop price before he enters into it.
For day traders and traders of derivatives and options the strategies are totally different and they should remain alert through out the market session and act quickly.
Speed matters here and a smart bee collect more honey.
To summarize, any one who enters stock market with a scientific approach and requisite patience is saved from making loss.