10 Stock Trading Secrets Wall Street Won’t Tell You

Are you looking to buy a stock? This article is for you. In it, we have mentioned the top 10 stock trading secrets Wall Street won’t tell you after doing research and personal experience. So keep tuned with this and make a note for your future investment.

How do you buy stock on the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE) and then sell it exactly? That’s all you need to do. 

Image credit- HowTheMarketWorks

The stock market is one of the best and most secure investments for everyone, from low-risk to high-risk investors, and it has the highest ROI. Many platforms help investors invest in high- and low-risk stocks like Zerodha, Upstocks, Angle, and more. 

Selecting any one platform for investing in stocks with these tips can help you build a stable and secure finance world. These ten stock trading secrets are highly valuable that Wall Street won’t tell you.

Let’s begin this exploration.

10 stock trading secrets Wall Street won’t tell you

In this article, you can find the ten secrets of trading applicable in the finance world and can help you to build your portfolio very rich. 

1. Understand the company’s nature and reasons for investing in them

Are you also an investor in the stock market and looking to buy a stake in a company and find a purpose to select any company? Then this is the secret you must obey while buying any stock in any company. 

The reason for buying stock has never worked in the long run, and if you are also looking to buy any stock in any company based on its rising prices, then you may face a huge loss because buying stock never worked. Investors may make some money in the initial days, but at last, when it is held for the long run, then this stock may suck you into a never-ending whirlpool of losses.

A stock is just a stake in the company, and the more you have, the more you will be its partner, so you have to be careful and select it based on different factors like its history of business, establishing year, and how it is going to perform in the future.

Whenever you invest in any company, you must have certain reasons to buy it based on the nature of the business and its success ratio in the future. 

2. Company size matters for high profit

You say, “I love Maggi! And so does everyone. Therefore, Nestle must be an excellent stock!”

Let me ask you, “Great! But what if Maggi is just 1% of Nestle’s total sales, and products for the balance of 99% are not that great? Is Nestle also a great investment based purely on one product that contributes only 1% to its sales?”

Now what do you say?

In summary, see companies selling either products or services that everybody loves or is talking about to be worthy of “considering” as a possible investment.

But the bigger job for you as an investor is to know how much that great product or service means to the company. If it does not contribute meaningfully to the company’s sales and profits, then it cannot be a core reason to buy into that stock.

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3. Be suspicious of companies with growth rates of 50-100% a year

Not all growth is good or positive simply because it is growth; rather, it is a cancerous ideology that consumes all it gets.

In the same context, there should be some doubts about the companies, especially those that are growing at rates of more than fifty to hundred percent every year.

One reason being this is that such growth cannot be sustained for long (say, due to other competitors who would want to share the growth). The second pointed out that if such a company still wishes to continue with higher growth for a couple of more years, it may need to put in extra money for the business.

This could either mean stretching the balance sheet (by taking on debt) or diluting equity (by issuing new shares). Both of these are bad omens for existing shareholders.

What is more, one year of growth stagnation can very much surprise the stock exchange and result in a steep decline in share price.

4. Distrust diversifications, which usually turn out to be diversifications

What emerged from experience is that most diversifications that involve the acquisitions of companies in the same area or a different area altogether are a preserve of promoters’ egos and not for legitimate business purposes. Many of the diversifications are too often diversifications.

So be cautious with companies that are firing blanks in this sphere.

5. Dividends Are Your Friend

Apple’s stock dropped from $110.38 to $105.26 in 2015. That was an 11% decline, but investors who owned the stock all year lost only 3%. Why? Because Apple paid out $2.03 in dividends over the year.

Dividend-paying stocks aren’t immune from declines, but they do offer some insulation that others don’t. Rich dividends that look too good to last often do not last, either. Just ask the owners of Kinder Morgan, which slashed its quarterly payout by 75 percent in December.

Shark Tank investor Kevin O’Leary loves to tout a statistic that shows the vast majority of returns of the S&P 500 over time have come from dividends, not price increases. That’s why he insists he’ll never own a stock that doesn’t pay at least some of its profits out to shareholders. See “Why Kevin O’Leary Loves Dividends.”.

6. Take Market “News” With A Whole Shaker Of Salt

Wednesday, January 6, was equally rich on the headlines: Chinese stocks at their worst start of any year; GM in Lyft, Uber’s competitor; Saudi Arabia cuts ties with Iran. But is that any reason for U.S. stocks to fall by more than 2.5% as they did before reversing higher to find support?

From the point of view of an investor, the news flow that causes more frequent fluctuations at a daily level should merely be regarded as entertaining information rather than as a basis for making or changing course.

7. Invest in simple companies that appear dull, mundane, out of favour, and haven’t caught the street

By and large, it is a company that hardly gets attention from stock analysts and is seldom purchased by fund managers. Then the chance that the stock is available in the market at a great discount is very likely.

8. Companies that have no debt can’t go bankrupt

This is the most important lesson that you would remember (or forget) when it comes to identifying the right businesses for investment.

Companies that borrow money to grow their businesses might appear good (because they are ‘growing’).

But more often than not, such companies get so intoxicated by the growth that they make a mess of their balance sheets and, in the process, destroy whatever shareholder wealth they created during the “growth” years.

Look at real estate and construction companies, and you won’t have to look anywhere else for such examples.

9. Think Long Term

However, taxes are not the only problem that makes short-term trading an unprofitable activity for a majority of individuals. Dealing with shares intending to profit from a company’s recent quarterly results or a specific economic figure is something only machine trading sought after.

Favourable times are when a stock or sector is ignored by the market and the shares remain low even though they are tied to a stable economic performance that will deliver a string of profits. Companies in transportation like airlines and railroads have also faced very long periods of being out of favour while at some point delivering rather large gains as the economic backdrop and industry dynamics improve.

Years of poor management in the airline industry brought a line of bankruptcies in the 2000s. Still, the consolidation wave formed such champions as American Airlines, United Continental, and Delta Air Lines, ready to harvest positive factors, including the recently dropped fuel prices.

10. Know your needs and what you are paying

Before considering any further procedure for making an investment and gaining a profit, any investor should have basic knowledge of the process of buying and selling stocks. 

Different charges for broking are charged by the platforms using which the buying and selling of the stocks are made. Whatever the price and limit have been set by you will require a fixed time when you have to sell the stock for your maximum profit.

Conclusion

The stock world is the only finance sector where people can immediately make a profit with little investment but with the help of tips, secrets, and guidance from experts and stock professionals. The above-mentioned tips listed in this article will help you to invest in the stock market and grab a heavy profit.

Companies and businesses are among the highest investors in the world, making high profits and controlling the maximum stake in the economy of any state or country. There are various platforms and institutions that offer such tips and secrets, so it’s better to find the suitable tips that seem fit for you.