It should be noted that, it is not suggested to take stock exchange as a regular tool to make investments. Why? Stock exchange is relatively complicated, the profits you can make from it can not be duplicated, and most of the investors don't have the professional knowledge and rational emotions to participate in stock exchange. So if you really want to take part in the stock market we recommend you to choose the automatic investment plan or privately offered fund.
First, the essence of stock trading is based on the difference between different price judgments given by different people on enterprise equity.
The stock market, like other physical trading markets, can make money only by buying low and selling high. Some people are willing to buy the shares of the same enterprise for $20, while others think that $18 is a bit expensive. What is the basis of our judgment? We often use the price-earnings ratio to judge whether the stock price is relatively cheap or expensive. If you are optimistic about the prospects of the enterprise and its industry, and hold that the operating income and profit will continue to increase, you can buy the stock at the appropriate price-earnings ratio.
From the perspective of long-term trading, you need to choose an industry and enterprise that you are willing to invest in, buy it at a suitable price-earnings ratio, and sell it until the price-earnings ratio reaches a relatively high ratio. This is a relatively simple trading mode. But it is difficult to do so, due to our moods and emotions as human beings.
Second, enter the stock exchange market with sufficient liquidity. The stock market, like other equity investments, needs time as a starter. As far as short-term trading is concerned, more than 99% of investors are used to chasing up and killing down, and finally they are trapped by high positions. Amateurs use short-term trading to trade stocks. Most individual investors are no different from betting in casinos. For ordinary investors, it is suggested to trade for as long a period as possible, such as buying continuously in the bear market and selling one after another in the bull market. While engaging in stock trading, we must do our own liquidity management well, so as to have the confidence and patience to see all the fluctuations of the stock market.
Third, successful stock trading is often anti-human. The feedback from the securities market to individual investors is very timely, even instantaneous. The next second you buy a stock, the market will tell you the result of your decision with the figures. This is in sharp contrast to some situations in our daily life. For example, a mother blames and criticizes her child loudly, and even beats her child. The character defects and other negative effects brought by this inappropriate education are invisible in a short time, and will gradually show and erupt even in adulthood. Therefore, parents who are not properly educated rarely realize their mistakes, because the feedback cycle is too long, and when they realize it, they have no chance to correct it. The stock exchange will immediately tell you whether the price you placed your order is appropriate or inappropriate.
Therefore, from the perspective of financial planning, it is suggested that most investors should not trade stocks by themselves, unless you make the necessary preparations, such as liquidity preparation.
