Share Market Knowledge: Why do shares start falling as soon as they are bought? If you follow 5 tips then you will not get cheated.

Investment Tips: Most of the people who invest in the stock market feel that their luck is very bad. As soon as they buy the stock, the price starts falling. It seems as if the stock market is targeting us and is out to cause us losses! Do you also feel the same? If yes, then this article will open your eyes. You will know why this happens?

Those who invest money in the stock market should first understand how the market works. Who are the people running it? Who invests so much money that the stock market goes up and down by lakhs of crores of rupees every day? A simple answer to this is that the people running the stock market are not retail investors like you and me. Then who are they? In fact, the stock market includes large investors (foreign institutional investors (FIIs), domestic institutional investors (DIIs), and high net worth individuals) as well as retail or small investors.

The biggest difference between these two types of investors is money. A retail investor comes to the stock market with a few thousand rupees to a few lakh rupees, whereas institutional investors have a money bank worth lakhs and crores of rupees. This is called smart money and this smart money truly drives the market.

This is how the real game happens?
Big investors have access to inside information about companies, more research and better analysis. They have a big team for all this work, which gets huge salaries. When a stock has fallen, big investors start investing money from there. Gradually the share price starts rising. After this, second level big investors (who have a few crores of rupees) start investing their money. They also have better analysis.

Also read – Share Market Knowledge: Find out whether the share will fly or sink by looking at just 2 things, there will always be profit.

After both of them invest money, the stock goes up a lot. Discussion starts on TV channels and newspapers. This is the time when the retail or small investor comes to know about that share. Due to the discussion, the same share starts attracting small investors also. This is the time when small investors invest money. They feel that this stock will now rocket. As retail traders buy shares, the price starts going up further.

cycle of demand and supply
A trader on Quora has given the same details in response to this question. This financial analyst named Jay Hauer says that by the time the retail trader makes the investment, the price has already gone up. After coming here, those (big investors) who have bought the stock from the lower level, start seeing good profits. From here they start booking profits. As those people withdraw their profits from the shares, the share price starts decreasing.

They hold so many shares that retail investors cannot absorb their supply and the price keeps falling. The law of demand and supply also applies here. At lower prices, when there is more supply (sellers), there are less buyers. Only large institutional investors absorb this supply. After that, when the market goes up, the demand starts increasing, after absorbing the entire demand, the same big investors start supplying i.e. start selling. This cycle continues like this.

So what should small investors do?
If you are a small investor then some things can save you from this vicious cycle. To earn money in the stock market, you have to follow some rules. These rules are as follows-

1. Do not buy shares due to FOMO: FOMO means Fear of Missing Out. When there is a stir about a stock, small investors feel that they should invest their money quickly, lest it be late. It is never too late in the stock market. You should remove FOMO from your mind and start investing slowly.
2. It is important to have patience: Once you have invested the money, you should sit comfortably. Should be forgotten for 2-3 years. If you are affected by the rise and fall of shares overnight, you will not make money.
3. Invest only that money which is in the buffer: In the stock market, you should invest only that money which you have in the buffer. Money that you will not need in the near future. One should never invest money by borrowing.
4. Sit for big profit: Generally it happens that when small investors start seeing a little profit, they sell the shares and leave, whereas when they start incurring losses, they keep sitting. Small investors should be careful that when profits are flowing, they should stay and go out at small losses.
5. Don’t fall prey to tips: You should not trust tips that are available everywhere every day. If you do not have knowledge of stock market then you should consult a certified investor before investing.

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