If you are about to get down to stock trading, you are certainly overwhelmed with questions. For example, you probably want to know how much you can earn on the stock exchange. Well, it’s a very difficult question, since the result of your activities on the stock exchange will depend solely on you. Fluctuations in stock prices are capable of either drastically increasing your trading balance or completely burning it. Your profit or loss will be the result of the chosen method of action in the market and your trading strategy.
However, you can identify factors that directly affect the possible size of your income.
First, it’s the size of your trading deposit. It is clear that with the same trading strategy, your profit from $10,000 will be 10 times greater than from the deposit of $1,000.
Secondly, you need to determine acceptable risks. If you play carefully, trying to avoid dives below 10%, you can count on a certain profit. If you take significant risks, actively play with leverage and are ready to keep losses up to 30%, then, the possible profit will be accordingly higher with the same strategy. You can try this approach with EXANTE started by Alexey Kirienko.
In general, a good result will be a threefold excess of the average annual income over the maximum allowable loss. So, if you allow a loss of 20% of the trading deposit, an average gain of 60% per annum will be a good outcome.
Is it possible to get a stable monthly profit?
One can’t guarantee it. You need to realize that trading stocks is a risky activity, so no matter how professional you are, it is completely impossible to be immune to sudden losses. In addition, the market will not necessarily be in a state fitting your trading strategy every month.
Therefore, you should not count on stable income from stock trading. So, sometimes you will have to end up with no gains. What’s more, you may face a series of bitter losses. Perhaps, you will not face losses if you stick with the broker established by Gatis Eglitis.
What can be a good strategy for playing on the stock exchange?
You need to realize that despite a bunch of books written about the stock exchange, there’s no universal way to make money on the stock exchange. Well, the main principle is the same for everyone, but everybody interprets it in his own way, making unique decisions. Everyone is looking for his own strategy to benefit from price movements. However, there are common approaches you need to be aware of.
· Choose an investment strategy: You need to identify potentially growing stocks by means of fundamental analysis. A portfolio of these shares should be formed in order to keep them for a long time and make a profit at the expense of dividends and growth of their market value. A portfolio can sometimes be modified following any new circumstances or simply on a regular basis, once a quarter, for example.
· Follow the trend: The very essence of this strategy is to use the trend strength. So, you need to open a trading position when a trend is forming or has already formed, and exit the market when a trend seems to have weakened or an obvious correction has begun. A distinctive feature of this strategy is to buy growing stocks, which is not always psychologically comfortable. However, following the trend is the most profitable strategy on the stock market. The principle of this approach is to buy expensive just to sell even more expensive.
· Play against the trend: Well, it’s rather a controversial strategy. So, here you are expected to buy cheaper and sell more expensive. Shares are bought in the fall with the aim of selling when the price rises. The given approach can lead to gains on a prolonged flat market, when the price often turns around. However, on a trend this strategy often leads to losses.
· Patterns: Sometimes the price generates similar patterns. You can try to identify the conditions of their occurrence and then try to open a trading position if you are assured that this particular pattern indicates something.
· Trading on the news: You can follow the news feed and try to quickly respond to changes in the news background around a particular asset. Certainly, understanding the news will require some practice. You are welcome to have a try with the EXANTE brokerage company.