Fundamental Trading Rules

The secret behind the success of many stock investors is application of fundamental trading rules in their dealings. These are basic principles that every stocks investor should possess to have make viable decisions when trading. Note that this kind of trading requires skills and knowledge of how it works and what affects it. These skills are acquired when you familiarize yourself with the fundamental and basic trading rules. Failure to know this result to total failure since guess work strategy does not work at all. This article highlights some of these rules and how they are applied to make your investment viable and profitable in the long run.

2 Basic Strategies: 

Stock investment generally involves trading of shares and securities of different companies. There are two basic strategies that are used by the investors in this market.

A.  Buy & Sell

There is buy and sell strategy where the investor relies on favorable price fluctuation of stocks. ‘

B. Buy & Hold

Another one is buy and hold strategy where the investors buy the traders with an aim of gaining from dividends. These are returns given to shareholders at the close of every financial year. These two strategies involve financial risks which should be calculated before you enter into the market.

Ways to Minimize Your Risks: 

There are several methods that one can use to minimize the risks and maximize the opportunities in this sensitive investment. There are four fundamental aspects that should be considered when investing in stock market. These are earning of each share, the share price to its earning ratio, the current price of the share to its par value ratio and the current dividend yield. When these four variables are analyzed, you will be able to know whether the specific shares are worth investing or not. By doing this, you will be able to acquire simple analysis skills which provide the basis for each trading you make.

Stock Market Supply & Demand Game: 

There are other guidelines that help stocks traders especially the beginners in maximizing the opportunities and minimizing the risks. It is essential to note that stock market exists to make money and this is a reality to those who observe fundamental trading rules. Like any other market, prices are determined by the forces of demand and supply. This helps one to know when to buy and when to sell with an aim of making profit. The investor should also avoid the temptation of buying the risky stocks especially when returns are low. This is done with an assumption that the yield will be higher in future. This should always be avoided in stock trading.

Long Term VS Short Term Investing: 

These basic rules are essential for new entrants in the market. Most of them may not have adequate information on how to start. There are two methods that are used by most investors. There are long term and short term investment. Long term investment applies to those who look at the growth and prospects of the stock market. Short term looks at the current value of the stocks with an aim of making quick returns out of the investment. New investors in the market are advised to look at the future growth of the market and the company you are investing in. This is part of the fundamental trading rules in stock market.

* stock trading always has risks, so seek a financial advisor to help you fully prepare before investing into the market.

About Guest Post Author:

Nate trades stock as a hobby and is a freelancer writer for The Complete Lawyer. A community site filled with related legal news and share-able articles.