Stock Market Trading Tips - How To Make Them Work For You?

Once upon a time, there were stock market tips. There were some traders and investors who were following them. Today the stock market tips continue to come and have their followers. But the tips-followers set is hardly the same. The story goes on and on. What lesson can we learn from this story?

Source is very important to get reliable tips and advices. However, even with good and trustworthy sources, stock tips may still not work for us. Here are some reasons to ponder.

For this purpose, I will consider stock tips and stock advices in the same category. Similarly the suggestions are equally applicable for stock trading as well as investing in stock market.Though essentially trading and investing are two different activities, the topic of tips and advices is equally applicable in both cases.

1) The approach in stock trading

Some tips are based on technical analysis and some others are based on fundamental analysis. Some tips are purely on news and some are derived from gossip and rumors. If the approach you are following in your trading or investing is different, the tip may not suit you at all irrespective of how good or acurate it may be.

2) Periodicity or trading cycle

Tips hardly talk about how long they are valid or what is the duration to take profit. If a stock advice is based on possible higher than expected results, you need to wait until the results. On the other hand, if the tip is based on saturation of a technical signal, the time frame would be different based on the technical cycle chosen. Unless you also understand and follow the same duration as the advice, it is difficult to work. And then to complicate the matters, different advices are based on different trading cycles!

3) The rationale for specific stock advice

An advice to buy a stock might be based on the news of a new big order for that company. However in actual situation, such a big order might put strain on allocation of company resources effecting the work on their other work-in-progress orders. The overall result might be temporary shortfall in their deliveries and reduction in the share price. As an outsider, you can never pick up the right rationale.

4) External factors affecting stock market

There are many factors outside the stock price. Inflation, global economic factors and many more. So even the best tip may not work if many external factors are not in line.

5) Conflicting tips and advices from various stock market advisers

For all the reasons above, different aand conflicting stock advices can come from various sources pertaining to the same stock. Out of them one will work and others wont. Again unless you clealy understand what you are doing, you may not be successful.

Then how to make the stock market tips work for you?

1) Develop your own trading system and strategy

Develop your own trading strategy which works for you. It may be fundamental or technical or a combination, it might be short time or long time, it might be based on equity or derivatives, find out what suits you. Learn all the necessary information about stock markets and stock trading. Never jump into share market without knowing the risks involved. There are stock market game sites that allow you to learn market without putting actual money. You can use them to learn stock market or do paper trading for some time before you venture into using your hard cash.

2) Do your own study and research

Do you own study and research and trade or invest in only stocks where you have done your study and in the areas and companies that you are familiar with. If you can't figure out what's happening in the stock market, it is better to stay away.

3) Take your own stock trading or investing decisions

Take tips and advices from others as an input and trigger for further study. Finally make a decision on your own. Take full responsibility for your own investing or trading decisions. Taking advice from one considered as an expert is good, but finally the money is yours.

4) Follow Risk Management strategies

Learn about risk management strategies. Never use loan money for stock market. Do not consider Stock Market as a bank where you can withdraw money when you require. Always use a stop loss at the trade level and the account level. Follow the risk mechanisms for your account both at the single trade level as well as your account level.

Never put your investing and trading decisions in the hands of others. Educate yourself well, take full responsibility for your actions and you will surely succeed.