How beginners can trade stocks?
No matter if you want to invest in the stock market for the short term or the long term. There are a set of activities you need to follow to put your money in shares. Knowing what to do makes it easy for stock market trading for beginners. Thus, it may help to improve chances of success.
In this article, we have covered easy tips on how to get started with share market trading for beginners. But before we start, let’s get to know more about the share market.
What is the share market?
A share market is a place where a trader or an investor is involved in buying and selling securities. These securities like bonds, options, shares, forex, commodity, etc. Here are a few important terms you need to acquaint before entering the share market:
- Stocks: These are small pieces of public-owned companies
- Shares: Unit of a stock
- Stock price: It is a price of a company’s share value which is determined by its worth. A stock price is not variable, it fluctuates with time.
- Stock exchange: Most of the buying and selling is done in the stock exchange during trading hours.
- Market liquidity: It means the share is bought and sold at a stable price.
The stock market is not complex if you gain knowledge. Starting with the learning basics glossary terms will help you be on the right foot.
What is stock trading?
Stock market primarily means buying and selling of shares in the secondary market on the same day. So it is necessary to know the difference between primary and secondary markets.
- A primary market is where companies issue new securities for public investment.
A secondary market is where you can buy or sell shares that are issued in the primary market.
Once you learn the basics, the next step is to understand the different types of trading styles.
Types of Traders
Now, this is time to discuss the type of trader you want to become. Before you decide you need to ask a few questions yourself. Do you trade every day or once in a while? Do you want to hold them for the short-term or long term?
Although there are no right or wrong approaches to trade, there are risks or rewards in every approach. Here is some common practice you can choose among:
- Day trading: Day trading is a process of buying and selling stocks throughout a day. A day trader is someone who executes four or more trades within 5 business days.
- Swing trading: It is another popular form of long-term trading where a swing trader trades from one day to several weeks. This type of trading offers quick rewards and a low risk of losing money.
- Investing: This form of trading involves buying and holding stocks for the long term. The period of holding the stocks can be 30 days to end-numbers of years. It has comparably less risk and stable return.
These were some different forms of trading styles that you must choose from before planning to share market trading for beginners. The next step is to understand how much money you can spend to trade.
How to start trading in the stock market?
As a share market trading for beginners follows these steps to being your journey:
- Open a Demat account:
In order to enter the stock market as an investor or a trader, you are required to open a Demat account. Without a Demat account, you won’t be able to trade. The Demat account is like a bank account where you can hold money and use it for trading.
- Understand stock price movements
The price of a share moves based on companies and market economy position. Gaining market knowledge will enhance your concepts. This will help you to analyze the right price to enter or exit the trade.
- Price bid
Traders need to buy a stock at a bid price. A bid price is a share’s maximum price whereas an asking price indicates the minimum price at which the seller is willing to sell a share. To earn a profit, you need to decide the correct bid price and predict the asking price.
- Market analysis
To plan your trade you may require to learn technical and fundamental techniques of stock market analysis. Technical analysis is a study of the stock price using previous market data. Whereas fundamental analysis evaluates security by measuring its intrinsic value.
- Stop loss:
Share market price fluctuates due to several reasons. So as a stock market beginner you are required to study market price movements and a way to prevent heavy losses. During price evaluation, you need to set a stop-loss price when exiting the market.
- Talk to a mentor:
The share market is unpredictable, thereby no one can predict a stock price accurately. Taking advice from an expert trained beginner can help you to take profitable actions.
Trading in the share market for beginners can be risky. You need to make the move to become successful but without adequate knowledge investing in the share market is tricky. Thus, it is always advised to learn before you put your feet in trading.