Passive Income Through Trading

With the cost of living shooting up the roof, most people are looking for a secondary source of income in order to live well. With the advent of online trading, it has become extremely easy for a lot of working professionals to open a Demat account and start trading. The fact that you are willing to put in an effort to earn extra money is good but you have to learn how to earn it and the risks involved as well. You can start trading online with a few thousand rupees and then gradually build your way up to lakhs and crores.

The fact that you want to generate a secondary income obviously points that you have a primary income, a day job that keeps you occupied for most part of the day. However, if you think that you can just read the financial papers in the morning and spend an hour for trading, then that won’t cut it. Reality is harsh, you have to treat trading as your secondary job in order to generate secondary income.

Of course you will not be able to devote the amount of time that a regular trader can but you have to devote as much time as you can in order to succeed. One of the essential skills that you need to survive the world of trading is to be patient. You might feel frustrated because you missed out on a trade, not being able to devote yourself full-time, but such opportunities will come and go. The best option is to stay calm and remain patient.

What you need to keep in mind, is that you should not jeopardize your primary job in order to generate your secondary income. Your primary income is still the reason why you can invest money to generate secondary income. You should try to find and strike a balance between the two for better productivity.

Here’s a few tips as to how you can generate secondary income in the stock market through trading:

• If you want to make some money off the stock market, your safest bet would be some general long term investments. In the long run, the stock market is pretty profitable so you should not worry too much about any short term changes.
• Have a diversified and balanced portfolio spread over all asset classes so that you can spread your risk.
• Emotions play havoc in the stock market, so keep your ears open for all sorts of news. Prior performance is a great indicator of how a stock performs but do not rely on past performance only if you want to invest in a stock. Read up on the company earnings and how much profit they have posted for that quarter, whether there has been any growth or not in order to make sure that your money is in safe hands.
• While trading online, always be prepared for the worst and use stop losses. A general rule of thumb would to set up a stop loss at 15% below the purchasing price. You should sell your stock at this point to avoid more losses.
• Do not act on any tips without conducting a research on your own. It is extremely dangerous to trade on what others might have to say.

Trading might prove to be the perfect way to supplement your primary income. If you are tasting success with trading, you should totally quit your job and become a full time trader. With time and sufficient money, you can start full time trading on your own. However, in order to become successful you have to work hard and do your homework.