The legendary stock trader, Jesse Livermore, made his fortune, in large part, due to his
ability to understand human nature as it applied to the stock market.
His ability to read the ticker tape to interpret or confirm the reactions
perceived by the crowd to the various events of the day was extraordinary.
Market psychology: It’s not what “it” is that matters, it’s what “it” is perceived
to be that matters.
Because No One Cares More About Your Money Than You
Then you need to be wise and plan accordingly. Trading in stock is an option to make money fast. Mutual funds and financial institutions use stock option trading to reap benefits. The stock trading system is very supportive to them rather than the small investor. The individual investor can gain as well but prudence is the watch word.
Advice to help you
If you are a new entrant; professional help can provide you the least risk and good reward stocks. Their analysis depends on a number of factors. A few factors that you could use are
1.Understand one stock completely. To which industry the company belongs? What is the company’s investment? How it makes its money? Read its press releases, news and result broadcasts. Know the competitors of the company and the trends in the particular industry.
2.Spend time on research and focus on what is important. Whenever you make decisions on buying, selling or holding write it down as to why you are making such a decision. A review of successful decisions and not so successful decisions can help you in future stratagem
3. Evaluate and re-evaluate every stock on the market or the stock you have chosen the same way. Comparing and contrasting can give you some valuable insights into the stock market.
4. Discuss with friends and explain the rationale of why you bought your stock and how you expect to perform. They may be rational when you are not.
5. High valuations entail high risk (future performance determines the value of stocks and in case these predictions do not materialize prices will decline). Penny stocks too are the high risk category.