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Learn How to Buy Stock

 

Investing in a stock market is one of the best investment options that can lead to riches. Many people have found success in this investment method because of their familiarity with the market and, sometimes, some luck. While some may find it challenging to invest in this field, others can simply breeze through this investment strategy and earn.



Because of the challenges posed when investing in stocks, it is important to know the pitfalls when buying stocks. Purchasing stocks or shares is one of the first activities an investor would do as this will be used to sell in the future. This is also one of the most challenging as too many things can go wrong in this transaction.



Here are the common pitfalls you should avoid when buying stocks:



Unknown market - Do not buy shares in an industry or a market that you are not familiar with. This is a common mistake for first time investors as they are promised with impressive returns in just a few months or even days.



Focusing in one industry - Purchasing stocks in one industry can easily lead to your financial downfall as stocks from different companies but same industries can be affected at the same time. Expanding to other industries is a must to balance or have a back-up in case one industry fails.



Working with unknown broker - Your broker is your best ally when buying stocks. But there are some brokers who are more interested in making money rather than helping you. Research on their information online or ask other investors regarding their business approach.



Immediately playing in the real field - Buying the right stocks and allowing them to grow can't be immediately learned. But many brokers, especially online brokerage provide software where you can practice your trading. You can hone your skills in buying stocks without any danger of losses.



Aggressive start-up in buying stocks - Purchasing too many stocks is never a good thing for first time investors. Controlling a small number of stocks is very challenging and it can be really difficult for first time investors to monitor market activity and use them to the stock market.



Avoiding to expand to other risks - There are stocks that are considered high risk while others provide stability but slow growth. Buy stocks from both ends so that you can grow and even learn from actual experience on what stocks to buy and to avoid.



Relying too much on news - Many investors base their buying practices on what they read in the news. Avoid this pitfall by doing extensive research on the company background as well as their past and current performance in the market.



Avoiding the advantage of pink sheet market - Another way to practice your trading knowledge is to go to pink sheet market. These are small companies aiming to go public but not yet officially part of the trading. You can try your skills in this market as they stocks are affordable.



Going with the flow - The law of demand and supply will always be applicable in the stock market. Buying what everyone else buys does not provide the earnings you expect from the stock market. Worst, the fad stock might go down which can only affect your portfolio and your pocket.



Buying without a plan - Before you even sign up to any broker, you need to have an idea. This will help you focus on some industries and stocks that can help you succeed in the future. Relying on the tips offered by your broker can only lead to disaster.





Read Next: 10 Tips for Day Trading



 

 

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