What is investing?
In short, investing is the act of allocating funds into various financial assets to put your money to work and earn from the resultant income generated. Ideally, this can act as a secondary or, in some cases, primary income stream and help you fulfill your financial goals. We mostly view only the handful of drawbacks that exist. And eventually, hold a blind eye towards the tons of benefits it brings along. Let's not do that anymore. It's time to explore the opportunities the world of investing has in-store for you. To start off with, let's uncover the distinction between saving and investing.
Disclaimer: I am not a SEBI registered research analyst. I make recommendations based on information that I gather from reliable sources to the best of my knowledge. But this does not guarantee desired results hence, you’re advised to use your discretion before making an investment decision.
For any queries, doubts or feedback feel free to reach out to me at @growfurtherwithhemang
Our firm follows a strict policy of No Commission & No Bias and therefore, we are not compensated by any of the companies that we recommend. Also, our associates are in no way related to the recommended companies and there was no material conflict of interest while making the recommendations. We believe in not just refereeing but playing the game ourselves as well and so, we are just trying to give you the best possible advice.
In short, investing is the act of allocating funds into various financial assets to put your money to work and earn from the resultant income generated. Ideally, this can act as a secondary or, in some cases, primary income stream and help you fulfill your financial goals. We mostly view only the handful of drawbacks that exist. And eventually, hold a blind eye towards the tons of benefits it brings along. Let's not do that anymore. It's time to explore the opportunities the world of investing has in-store for you. To start off with, let's uncover the distinction between saving and investing.
Disclaimer: I am not a SEBI registered research analyst. I make recommendations based on information that I gather from reliable sources to the best of my knowledge. But this does not guarantee desired results hence, you’re advised to use your discretion before making an investment decision.
For any queries, doubts or feedback feel free to reach out to me at @growfurtherwithhemang
Our firm follows a strict policy of No Commission & No Bias and therefore, we are not compensated by any of the companies that we recommend. Also, our associates are in no way related to the recommended companies and there was no material conflict of interest while making the recommendations. We believe in not just refereeing but playing the game ourselves as well and so, we are just trying to give you the best possible advice.
📊 What Is Stock Market ? 📊
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A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment in the stock market is most often done via stockbrokerages and electronic trading platforms. Investment is usually made with an investment strategy in mind.
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📉 @growfurtherwithhemang 📈
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A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment in the stock market is most often done via stockbrokerages and electronic trading platforms. Investment is usually made with an investment strategy in mind.
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📉 @growfurtherwithhemang 📈
📊 What Is Equity ? 📊
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In stock market parlance, equity and stocks are often used interchangeably. Stocks and equity are same, as both represent the ownership in an entity (company) and are traded on the stock exchanges. Equity by definition means ownership of assets after the debt is paid off. Stock generally refers to traded equity.
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📉 @growfurtherwithhemang 📈
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In stock market parlance, equity and stocks are often used interchangeably. Stocks and equity are same, as both represent the ownership in an entity (company) and are traded on the stock exchanges. Equity by definition means ownership of assets after the debt is paid off. Stock generally refers to traded equity.
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📉 @growfurtherwithhemang 📈
📊 What Makes Stock Prices Go Up & Down? 📊
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There are many factors that determine whether stock prices rise or fall. These include the media, the opinions of well-known investors, natural disasters, political and social unrest, risk, supply and demand, and the lack of or abundance of suitable alternatives. The compilation of these factors, plus all relevant information that has been disseminated, creates a certain type of sentiment (i.e. bullish and bearish) and a corresponding number of buyers and sellers. If there are more sellers than buyers, stock prices will tend to fall. Conversely, when there are more buyers than sellers, stock prices tend to rise.
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📉 @growfurtherwithhemang 📈
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There are many factors that determine whether stock prices rise or fall. These include the media, the opinions of well-known investors, natural disasters, political and social unrest, risk, supply and demand, and the lack of or abundance of suitable alternatives. The compilation of these factors, plus all relevant information that has been disseminated, creates a certain type of sentiment (i.e. bullish and bearish) and a corresponding number of buyers and sellers. If there are more sellers than buyers, stock prices will tend to fall. Conversely, when there are more buyers than sellers, stock prices tend to rise.
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📉 @growfurtherwithhemang 📈
📊 Why Is The Stock Market So Difficult To Predict? 📊
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Let’s assume stock prices have been rising for several years. Investors realize that a correction will come and stock prices will tumble. What we don’t understand is what will trigger the selloff or exactly when it will occur. Therefore, some investors will sit on the sidelines holding cash, waiting for the opportune time to get in. Those who are willing to assume the risk may jump in because the return on cash is so low and it hurts to earn zero while watching stocks move higher. This begs a couple of key questions. If you’re on the sidelines, how will you know when to get in? If you’re already in, how will you know when it’s time to get out? If the stock market was predictable, these questions could easily be answered. However, it is not. There are actually three issues an investor should consider. The first is understanding the point at which stock prices are fairly valued. The second issue is the event that will cause a downturn. The final issue is understanding the human decision-making process.
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📉 @growfurtherwithhemang 📈
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Let’s assume stock prices have been rising for several years. Investors realize that a correction will come and stock prices will tumble. What we don’t understand is what will trigger the selloff or exactly when it will occur. Therefore, some investors will sit on the sidelines holding cash, waiting for the opportune time to get in. Those who are willing to assume the risk may jump in because the return on cash is so low and it hurts to earn zero while watching stocks move higher. This begs a couple of key questions. If you’re on the sidelines, how will you know when to get in? If you’re already in, how will you know when it’s time to get out? If the stock market was predictable, these questions could easily be answered. However, it is not. There are actually three issues an investor should consider. The first is understanding the point at which stock prices are fairly valued. The second issue is the event that will cause a downturn. The final issue is understanding the human decision-making process.
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📉 @growfurtherwithhemang 📈
📊 Stock Valuation 📊
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The actual price of a stock is determined by market activity. When making the decision to buy or sell, the investor will often compare a stock’s actual price to its fair value. For example, if a stock is trading at $30 per share and its fair value is $35, it may be worth purchasing. Conversely, if it trades at $30 but its fair value is $25, the stock would be considered overvalued and the investor would be wise to avoid it. What is a stock’s fair value and how do you calculate it? Ideally, it would be based on some standardized formula. However, there are many ways to derive this figure. One method is to combine the value of a company’s assets on its balance sheet, minus depreciation and liabilities. Another is to determine its intrinsic value, which is the net present value of a company’s future earnings. We have briefly discussed two methods. There are a number of others. Because the methods yield a slightly different result, it’s sometimes difficult to know if a stock is overvalued, undervalued, or fairly valued. And even if it is overvalued, that doesn’t mean investors will suddenly sell and the price will fall. Actually, a stock can remain overvalued for quite some time. This is also why it can be problematic to make buy/sell decisions based on where the price of the stock is in relation to some moving average.
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📉 @growfurtherwithhemang 📈
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The actual price of a stock is determined by market activity. When making the decision to buy or sell, the investor will often compare a stock’s actual price to its fair value. For example, if a stock is trading at $30 per share and its fair value is $35, it may be worth purchasing. Conversely, if it trades at $30 but its fair value is $25, the stock would be considered overvalued and the investor would be wise to avoid it. What is a stock’s fair value and how do you calculate it? Ideally, it would be based on some standardized formula. However, there are many ways to derive this figure. One method is to combine the value of a company’s assets on its balance sheet, minus depreciation and liabilities. Another is to determine its intrinsic value, which is the net present value of a company’s future earnings. We have briefly discussed two methods. There are a number of others. Because the methods yield a slightly different result, it’s sometimes difficult to know if a stock is overvalued, undervalued, or fairly valued. And even if it is overvalued, that doesn’t mean investors will suddenly sell and the price will fall. Actually, a stock can remain overvalued for quite some time. This is also why it can be problematic to make buy/sell decisions based on where the price of the stock is in relation to some moving average.
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📉 @growfurtherwithhemang 📈
📊 When Is The Best Time To Buy & Sell? 📊
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The two most important decisions an investor will make are when to buy and when to sell. The best time to buy is when others are pessimistic. The best time to sell is when others are actively optimistic. When buying, remember that the prospect of a high return is greater if you buy after its price has fallen rather than after it has risen. But caution should be exercised. For example, after the stock of fictitious Company X declined by 30%, 40% or more, the first question to ask is why. Why did the stock fall as it did? Did other stocks in the same industry experience a decline? If so, was it as severe? Did the entire stock market fall? If the broader market or other stocks in the same industry/sector performed relatively well, there may be a problem specific to Company X. It’s best to adopt a buy/sell discipline and adhere to it. Benjamin Graham, the father of value investing, once said, “The buyer of common stocks must assure himself that he is not making his purchase at a time when the general market level is a definitely high one, as judged by established standards of common-stock values.” His reference was to what we discussed as fair value under the section Stock Valuation above.
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📉 @growfurtherwithhemang 📈
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The two most important decisions an investor will make are when to buy and when to sell. The best time to buy is when others are pessimistic. The best time to sell is when others are actively optimistic. When buying, remember that the prospect of a high return is greater if you buy after its price has fallen rather than after it has risen. But caution should be exercised. For example, after the stock of fictitious Company X declined by 30%, 40% or more, the first question to ask is why. Why did the stock fall as it did? Did other stocks in the same industry experience a decline? If so, was it as severe? Did the entire stock market fall? If the broader market or other stocks in the same industry/sector performed relatively well, there may be a problem specific to Company X. It’s best to adopt a buy/sell discipline and adhere to it. Benjamin Graham, the father of value investing, once said, “The buyer of common stocks must assure himself that he is not making his purchase at a time when the general market level is a definitely high one, as judged by established standards of common-stock values.” His reference was to what we discussed as fair value under the section Stock Valuation above.
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📉 @growfurtherwithhemang 📈
📊 Bull Markets Vs Bear Markets
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Neither is an animal you’d want to run into on a hike, but the market has picked the bear as the true symbol of fear: A bear market means stock prices are falling — thresholds vary, but generally to the tune of 20% or more — across several of the indexes referenced earlier.
Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns. In other words, a bull market typically means investors are confident, which indicates economic growth. A bear market shows investors are pulling back, indicating the economy may do so as well.
The good news is that the average bull market far outlasts the average bear market, which is why over the long term you can grow your money by investing in stocks.
The S&P 500, which holds around 500 of the largest stocks in the U.S., has historically returned an average of around 7% annually, when you factor in reinvested dividends and adjust for inflation. That means if you invested $1,000 30 years ago, you could have around $7,600 today.
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📉 @growfurtherwithhemang 📈
📊
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Neither is an animal you’d want to run into on a hike, but the market has picked the bear as the true symbol of fear: A bear market means stock prices are falling — thresholds vary, but generally to the tune of 20% or more — across several of the indexes referenced earlier.
Bull markets are followed by bear markets, and vice versa, with both often signaling the start of larger economic patterns. In other words, a bull market typically means investors are confident, which indicates economic growth. A bear market shows investors are pulling back, indicating the economy may do so as well.
The good news is that the average bull market far outlasts the average bear market, which is why over the long term you can grow your money by investing in stocks.
The S&P 500, which holds around 500 of the largest stocks in the U.S., has historically returned an average of around 7% annually, when you factor in reinvested dividends and adjust for inflation. That means if you invested $1,000 30 years ago, you could have around $7,600 today.
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📉 @growfurtherwithhemang 📈
📊 How The Economy Affects The Stock Market? 📊
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There are many factors that affect how the stock market is doing, and whether it’s moving up or down: the political climate, social factors, interest rates, trends and shifts in what investors prefer.
So,how does the economy affects the stock market?
If the general population feels as if the economy will soon be taking a turn for the worse, they tend to sell stock because bonds and treasuries offer a safer return. On the flip side, when people are feeling confident and optimistic about the economy, they tend to buy stock, taking more risk for greater reward.
From a high-level approach, when people feel good about the economy, they tend to buy more stock. When things are happening in the world make them feel unsure, they will be more conservative, and might gravitate toward lower-risk investments such as bonds and Treasury bills.
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📉 @Growfurtherwithhemang 📈
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There are many factors that affect how the stock market is doing, and whether it’s moving up or down: the political climate, social factors, interest rates, trends and shifts in what investors prefer.
So,how does the economy affects the stock market?
If the general population feels as if the economy will soon be taking a turn for the worse, they tend to sell stock because bonds and treasuries offer a safer return. On the flip side, when people are feeling confident and optimistic about the economy, they tend to buy stock, taking more risk for greater reward.
From a high-level approach, when people feel good about the economy, they tend to buy more stock. When things are happening in the world make them feel unsure, they will be more conservative, and might gravitate toward lower-risk investments such as bonds and Treasury bills.
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📉 @Growfurtherwithhemang 📈
📊 Different Types of Stocks 📊
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There are two main types of stocks:
1⃣ Common Stock
2⃣ Preferred Stock
Common Stock
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Common stock is, well, common. When people talk about stocks in general they are most likely referring to this type. In fact, the majority of stock issued is in this form. We basically went over features of common stock in the last section. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Investors get one vote per share to elect the board members, who oversee the major decisions made by management.
Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost since common stocks entail the most risk. If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders, and preferred shareholders are paid.
Preferred Stock
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Preferred stock represents some degree of ownership in a company but usually doesn't come with the same voting rights. (This may vary depending on the company.) With preferred shares investors are usually guaranteed a fixed dividend forever. This is different than common stock, which has variable dividends that are never guaranteed. Another advantage is that in the event of liquidation preferred shareholders are paid off before the common shareholder (but still after debt holders). Preferred stock may also be callable, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason (usually for a premium).
Some people consider preferred stock to be more like debt than equity. A good way to think of these kinds of shares is to see them as being in between bonds and common shares.
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📉 @growfurtherwithhemang 📈
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There are two main types of stocks:
1⃣ Common Stock
2⃣ Preferred Stock
Common Stock
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Common stock is, well, common. When people talk about stocks in general they are most likely referring to this type. In fact, the majority of stock issued is in this form. We basically went over features of common stock in the last section. Common shares represent ownership in a company and a claim (dividends) on a portion of profits. Investors get one vote per share to elect the board members, who oversee the major decisions made by management.
Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost since common stocks entail the most risk. If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, bondholders, and preferred shareholders are paid.
Preferred Stock
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Preferred stock represents some degree of ownership in a company but usually doesn't come with the same voting rights. (This may vary depending on the company.) With preferred shares investors are usually guaranteed a fixed dividend forever. This is different than common stock, which has variable dividends that are never guaranteed. Another advantage is that in the event of liquidation preferred shareholders are paid off before the common shareholder (but still after debt holders). Preferred stock may also be callable, meaning that the company has the option to purchase the shares from shareholders at anytime for any reason (usually for a premium).
Some people consider preferred stock to be more like debt than equity. A good way to think of these kinds of shares is to see them as being in between bonds and common shares.
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📉 @growfurtherwithhemang 📈
📊 What Is A Stockbroker? 📊
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A stockbroker is a professional who executes buy and sell orders for stocks and other securities on behalf of clients. A stockbroker may also be known as a registered representative, investment adviser or simply, broker. Stockbrokers are usually associated with a brokerage firm and handle transactions for retail and institutional customers alike. Stockbrokers often receive commissions for their services, but individual compensation can vary greatly depending on where they are employed. Brokerage firms and broker-dealers are also sometimes referred to as stockbrokers themselves. The most commonly referenced stockbroker firms are discount brokers.
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📉 @growfurtherwithhemang 📈
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A stockbroker is a professional who executes buy and sell orders for stocks and other securities on behalf of clients. A stockbroker may also be known as a registered representative, investment adviser or simply, broker. Stockbrokers are usually associated with a brokerage firm and handle transactions for retail and institutional customers alike. Stockbrokers often receive commissions for their services, but individual compensation can vary greatly depending on where they are employed. Brokerage firms and broker-dealers are also sometimes referred to as stockbrokers themselves. The most commonly referenced stockbroker firms are discount brokers.
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📉 @growfurtherwithhemang 📈
📊 Understanding The Role Of A Stockbroker 📊
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Stockbrokers research how companies are doing financially so that they can advise clients as to whether or not they should invest in a particular company. Stockbrokers work for individuals or companies and with other financial dealers. They need to be able to handle stressful situations and have strong communication skills.
➡️ Duties & Tasks Of A Stockbroker
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🔴Buys, trades and sells orders based on research.
🔴Daily studies and interprets data from a variety of resources to determine how a company is doing financially.
🔴Maintains strong communication with clients regarding transactions and potential investment opportunities.
🔴Manages peoples shares and makes financial decisions on their behalf.
🔴Meets with clients to find out specifically their investment interest.
🔴Promotes services to attract new customers.
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📉 @growfurtherwithhemang 📈
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Stockbrokers research how companies are doing financially so that they can advise clients as to whether or not they should invest in a particular company. Stockbrokers work for individuals or companies and with other financial dealers. They need to be able to handle stressful situations and have strong communication skills.
➡️ Duties & Tasks Of A Stockbroker
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🔴Buys, trades and sells orders based on research.
🔴Daily studies and interprets data from a variety of resources to determine how a company is doing financially.
🔴Maintains strong communication with clients regarding transactions and potential investment opportunities.
🔴Manages peoples shares and makes financial decisions on their behalf.
🔴Meets with clients to find out specifically their investment interest.
🔴Promotes services to attract new customers.
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📉 @growfurtherwithhemang 📈
📊 Benefits of Long Term Investment 📊
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Reduces Transaction Fees (Cost)
Every time you invest, there is a transaction fee incurred. If you invest for a long-term and avoid repeated investments, you save multiple fees.
Tax Benefits (Tax)
Long-term investments are taxed at rates lower than your income tax bracket.
Stability (⚖)
Long-term investments exhibit lower volatility compared to short-term investments.
Best Saving Option (🧰)
Long-term investments serve as a good savings option for post-retirement, future home, or college, education, etc.
Compounding (📈)
Long-term investments grow at a compound rate of interest. Hence, the gain in this type of interest is substantial.
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📉 @growfurtherwithhemang 📈
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Reduces Transaction Fees (Cost)
Every time you invest, there is a transaction fee incurred. If you invest for a long-term and avoid repeated investments, you save multiple fees.
Tax Benefits (Tax)
Long-term investments are taxed at rates lower than your income tax bracket.
Stability (⚖)
Long-term investments exhibit lower volatility compared to short-term investments.
Best Saving Option (🧰)
Long-term investments serve as a good savings option for post-retirement, future home, or college, education, etc.
Compounding (📈)
Long-term investments grow at a compound rate of interest. Hence, the gain in this type of interest is substantial.
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📉 @growfurtherwithhemang 📈
📊 Benefits of Short Term Investment 📊
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🔴 Short-term investing offers flexibility to the investor as they do not need to wait for the security to mature in order to get cash. On the other hand, long-term investments can be liquidated by selling in the secondary market, but the investor earns lower profits.
🔴 Investors can make substantial profits in a very short amount of time.
🔴 It is less risky as money invested per transaction is substantially lower.
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📉 @growfurtherwithhemang 📈
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🔴 Short-term investing offers flexibility to the investor as they do not need to wait for the security to mature in order to get cash. On the other hand, long-term investments can be liquidated by selling in the secondary market, but the investor earns lower profits.
🔴 Investors can make substantial profits in a very short amount of time.
🔴 It is less risky as money invested per transaction is substantially lower.
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📉 @growfurtherwithhemang 📈
📊 What Is Day Trading ? 📊
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Day trading usually refers to the practice of purchasing and selling a security within a single trading day. While it can occur in any marketplace, it is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies. Day traders are attuned to events that cause short-term market moves. Trading based on the news is a popular technique. Scheduled announcements such as economic statistics, corporate earnings, or interest rates are subject to market expectations and market psychology. Markets react when those expectations are not met or are exceeded–usually with sudden, significant moves–which can greatly benefit day traders.
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📉 @growfurtherwithhemang 📈
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Day trading usually refers to the practice of purchasing and selling a security within a single trading day. While it can occur in any marketplace, it is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements that occur in highly liquid stocks or currencies. Day traders are attuned to events that cause short-term market moves. Trading based on the news is a popular technique. Scheduled announcements such as economic statistics, corporate earnings, or interest rates are subject to market expectations and market psychology. Markets react when those expectations are not met or are exceeded–usually with sudden, significant moves–which can greatly benefit day traders.
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📉 @growfurtherwithhemang 📈
📊 Day Trading Strategies 📊
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Day traders use numerous intraday strategies. These strategies include:
🛑 Scalping: This strategy attempts to make numerous small profits on small prices changes throughout the day.
🛑 Range trading: This strategy primarily uses support and resistance levels to determine buy and sell decisions.
🛑 News-based trading: This strategy typically seizes trading opportunities from the heightened volatility around news events.
🛑 High-frequency trading (HFT): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.
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📉 @growfurtherwithhemang 📈
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Day traders use numerous intraday strategies. These strategies include:
🛑 Scalping: This strategy attempts to make numerous small profits on small prices changes throughout the day.
🛑 Range trading: This strategy primarily uses support and resistance levels to determine buy and sell decisions.
🛑 News-based trading: This strategy typically seizes trading opportunities from the heightened volatility around news events.
🛑 High-frequency trading (HFT): These strategies use sophisticated algorithms to exploit small or short-term market inefficiencies.
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📉 @growfurtherwithhemang 📈