Akash Jha
The stock market has already reached record highs in only the third month of the fiscal year 2021. This level of optimism augurs well for the investment community. If you’re an investor seeking to embark on a path to wealth creation in FY2021, here are a few trading strategies you can use to select the best stocks.
- Keep an eye out for trends
Short-term traders might benefit greatly from gaining an understanding of the current market patterns and probable trend reversal points. Therefore, you need devote some effort to mastering the various methods of technical analysis of stocks. You can use it to find the best entry and exit positions.
- Watch out for market events
Short-term market fluctuations may be determined by news events such as quarterly profit reports, repo rate announcements, and budget presentations. In light of this, it is prudent to choose equities while keeping in mind the unfolding of the market.
- Be aware of the debt levels
The debt levels of a company provides you a lot of information about its financial situation. A business that relies too significantly on debt may not be able to survive for an extended period of time. Before investing in a company’s stock, it is crucial to examine its debt levels.
- The competition is important
Before you choose to select a stock for trading, always ensure that you check its competition. A company with weak rivals is likely to perform better than one with powerful rivals.
- Check the price to earnings (P/E) ratio
Irrespective of whether you’re into short term stock trading or long-term, the P/E ratio can give you some really excellent insights into how a stock is priced. It can help you determine whether a stock is undervalued or overvalued, allowing you to adopt the appropriate position.
- Assess the future growth potential
A company with low future development potential is not taken seriously by investors. Therefore, it is of the utmost importance to determine if a company has growth potential in the immediate future.
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- Keep yourself informed of the dividend policy
If your outlook is more long-term, you may wish to invest in a company that regularly distributes dividends. A company that pays dividends inconsistently, on the other hand, is not well received by investors.
- Look for companies with good management
Given that management is one of the main drivers of a company’s success, it is crucial to trade and invest in companies with a competent and experienced management team.
- Diversify your portfolio
This is likely something you’ve heard before, but it remains one of the best trading strategies you can implement. Diversification of your investment portfolio significantly reduces risk. Consider investing in a variety of securities across industries and sectors to mitigate investment risk.
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- Make use of rupee cost averaging
Rupee cost averaging can lessen the impact of losses by reducing the total cost of your investments. This strategy can be utilized effectively in both the long and short term. In some cases, it can even assist you profit.
Conclusion
Now that you’ve seen both long-term and short-term trading tips, it’s time to venture out on your own. If you do not have a trading and demat account already.
Also read :- Five Reasons your Demat Account Can be Closed
