The Johannesburg Stock Exchange is the largest of its kind in South Africa and in the African continent. Daily there are new traders who are exploring the option of trading stocks, whether long- or short-term.
Beginners may not always know where to start and therefore, they can consult some of the basic tips indicated below to guide them on their JSE stock trading journey.
Invest in online stock trading education
This is the most important tip that any good trader and investor will give you. Before you dive into the JSE, make sure that you learn the basics first, or you may set yourself up for a substantial amount of disappointment paired with losses.
You might like: Regulated forex brokers in South Africa
Know your risk tolerance
Whether you are trading with a long- or short-term in mind, you must realize your personal risk tolerance as it can lead you towards less risky investments. If you do not feel comfortable with risks, make sure that your portfolio is diversified.
Match your trading style to your lifestyle
Your choice of trading style is crucial from a lifestyle perspective. Short-term stock trading entail spending a substantial portion of time in front of your computer where long-term trading does not require increased periods spent at a trading terminal.
Always use a low-risk high-reward trading model
All type of trading involves some degree of risk and therefore you need solid risk management tools and practices in place before you start trading.
Keep an eye on the performance of stocks
It will take a great amount of research to find the right stocks, but with time and dedication, you can discover stocks that perform well despite the market conditions. Do not go for the largest stocks on the market first, there are stocks that show smaller upwards movements than others that show steadier performance.
Know when you should sell your stocks
There is a lot of focus on what and when to buy stocks, yet few traders consider what the best time will be to sell their stock. Do not let stock gains disappear as result of neglect. Plan ahead before you purchase a stock and learn about the specific conditions that will let you know that it is time to sell.
Only use disposable income to trade
Never use funds that you intend to use otherwise to trade in the stock market. A lot of beginners lose their funds believing that they can earn great profit within one day of trading. Traders must ensure that they have enough capital that they can afford to lose.
Study the markets and learn how they operate
Spending time learning about the markets is time that is never wasted. Prices in the stock market fluctuate as result of several factors such as political and economic changes, which are reflected in news reports. Learn about the driving factors and observe how prices move as result of them.
Know your goals and their timeline
Ensure that you have a goal for trading stocks and determine for how long you would want to do it. Make sure that your goals and profit expectations are realistic.
Ensure that your portfolio is diversified
Trading stocks that originate from companies in one industry may be risky as the entire industry may experience a blow. Trade stocks spread across several aspects so that risks are spread out equally and thus, you are less at risk of losing a substantial amount of capital all at once. Where one stock may perform poorly, another may be performing well.