There are two ways to operate on the stock exchange. As an investor, for example by buying shares on the basis of a certain dividend yield with the aim of keeping this share for a few years. The second way is as an active trader in financial instruments. This is about realizing profits in a short time.
These are large trading houses or banks that buy large numbers of shares and sell them again with a few cents earnings per share. They can also do this the other way; that is, sell shares that they do not own at that time and subsequently buy them back cheaper. This is called «short selling» in practice. Because this is accompanied by large quantities, they can influence the market and this has happened lately. I will go into this further. But it must be said that these organizations are making a lot of money with it right now!
Can private individuals earn money on the stock exchange? Trading successfully on the stock market is not easy, but it is possible! There are a few things essential here. If you are already an active trader on the stock exchange or are planning to become one, then it is advisable to adhere to the following rules. I deliberately use the word rules because in my opinion they are not recommendations but a must for every trader. That is the experience I gained during the personal guidance of many private traders.
A must for every trader:
Thanks to parties such as Binck and Saxo Bank offer real-time quotes, technical analysis, stop loss orders, etc. As a result, the technological edge that professional traders used to have, virtually disappeared.
2. What do you do?
Determine the instruments in which you will trade, such as options, trackers or shares. Then choose a limited number of funds. Bear in mind that there are large turnovers in these products and that they are volatile. Volatile means that the prices fluctuate a lot. If they don’t move, you can never make a profit from it.
3. How often do you act?
Make an estimate for yourself about how active you want to be. For example, is this on average 10 times a day or 5 times a week? This allows you to plan in advance how much time you will spend on your investments.
4. When to buy?
Determine a strategy. You need to develop an objective method for yourself within which you determine your buying and selling moments. This method should never be based on your feelings, because that is subjective. Technical analysis can be a good tool for this. For example, you can use an indicator from the Technical analysis called the Moving Average, which allows you to determine exactly when you purchase.
5 When to sell?
This is the most important and difficult part of trading on the stock exchange. Every successful trader has this item under control: determine in advance when you will sell. The starting point is: let profits run and keep losses small. 50% loss-making transactions and still profit! The most successful traders make a profit out of 100 purchases in half of the cases. However, the 50 profitable transactions yield more money than they lose on the 50 loss-making transactions. They keep the losses small, always!
In summary, acting is about having a strategy and implementing it in a disciplined manner. Each trader will choose a different form. The most important thing is that this form fits the trader exactly. When guiding traders, I also look to choose the right form, because I noticed that every trader can use some objective help.
Martin is an experienced account manager who has been a member of the Spanish BinckBank team for over eight years. Apart from dedicating his time to personal appointments with clients he is a speaker throughout Spain and Portugal at seminars.
The information in this article should not be interpreted as individual investment advice. Although Hugo compiles and maintains these pages from reliable sources, Hugo cannot guarantee that the information is accurate, complete and up-to-date. Any information used from this article without prior verification or advice, is at your own risk. We advise that you only invest in products that fit your knowledge and experience and do not invest in financial instruments where you do not understand the risks.