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The first step – Paper trading.

Hi there,

The first step to test to stock picking skills is to do paper trading. Paper trading is nothing but following the progress of the company and share price without actually buying it.

THIS IS HOW PAPER TRADING WORKS

  • Let’s assume that you intend to start investing in shares with Rs 100,000
  • Imagine that you have put that money in a particular stock you found out after studying the fundamentals.
  • Now, follow up the progress over a period of time and see if it moved according to your expectations.
  • If not, investigate where you went wrong- and you’ll start learning new things.
  • But, how long? We advice a newbie to follow the market for at least six months. Too long? Never. I guarantee. Your friend who has not done his homework will take only six months to vanish from the stock market.

Is this the process that you have taken? All the reading and theory should be accompanied some practical exposure- paper trading is where you start.

Over time, you’ll observe a lot of co-relations between the stock price and various indices or commodity prices. The price might move in odd and unpredictable ways.You’ll look for reasons to explain why it happened. All these will create the urge for more understanding and education.

And, this desire for new knowledge is a core trait of successful investors. To succeed in stock exchange investments, it is vital to firstly keep up to date about business and economy around you. You may want to read economic journals, annual reports of companies, company reviews, sectoral studies, interviews, stock market opinions and discussions and much more.It’s part of an ongoing education process that is very essential for success in stock markets.

There are many weekly magazines that specifically cover money, finance, stocks and investment. These will look at the annual reports and news releases of all quoted companies in a way that a daily newspaper cannot.

Moneylife, Dalal Street, Business and Economy, Outlook Money and our very on ‘Dhanam magazine’ in Malayalam are examples of such magazines.  Search and find out news, opinions and analysis about the company you selected to invest your money. The internet is full of information about any topic you want.

CONCLUSION

In the investment business, paper trading is the safest and the best way to start. Pick a couple of companies, make a note of their price, the date, the reason why you want to buy them and then start following the stock.

As time passes, the assessment which made the stock such a great prospect will play out. Was it a good or bad decision? Would buying the stock ‘for real’ have made a profit or a loss? If the result is loss, where was the mistake?

keep on digging. Every attempt to find answers will open new insights for you.

Happy investing!

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