How to Start Trading in The Stock Market
April 1, 2020
By : Merlin Joy, Senior Financial Trainer, Venteskraft
Trading in the stock market without any prior knowledge about stocks is gambling! The trader has to make sure that he is aware of the right strategies which have to be employed in the right market conditions in the right stock. It’s important to know the right tools to be used as the stock prices keep fluctuating and the trader should know how to make profits with an unstable price. You need to learn the basics of reading a chart and quotes. Stocks trade on an exchange where buying and selling take place between 9:15 am to 3:30 pm and in other hours too known as pre-market or post-market orders. You always sell a stock at a higher price than the buying price to make profits. In intraday trading it is possible to sell first and then buy later, it’s known as short selling.
The trader has to come into a decision whether trading is for every day or per week or occasionally, as he has to allocate time for trading alone apart from the other equipped hours of the day. Depending on this very decision the trader can choose whether to go for intraday or delivery where you can take a trade that lasts from a day to several weeks or even investing in long term positions. Once the purpose has been decided by the trader, finances have to be considered. In Intraday trading, the trader needs to maintain a minimum balance whereas delivery does not require the trader to keep a min capital requirement to trade. To invest requires less capital as the trade will be held for the long term. Also, you can save on commissions by making single trades rather than multiple, its applicable only if the capital is small.
To trade in the stock market one has to have a trading or demat account. The trader can choose a platform or a stockbroker with more leverage and less brokerage. A bracket facilitates trading between stock traders, allowing them to buy stocks from sellers and selling stocks to buyers. The stockbroker should be reliable and honest by making sure that they won’t involve in risky behavior that could put your trade at cost. Especially if you’re going for intraday trading the stockbroker should execute orders instantly without any interventions. It should also provide the trader the facility where you can cancel or modify your order instantly. There are many stockbrokers out there, according to the trader’s decision the demat account can be chosen that satisfies the style of trading adopted by the trader. The traders can also practice trading in their demo accounts. By this, the trader can get used to the different types of orders, market conditions, and stocks out there. The trader can formulate strategies and position them at the right market conditions and test them on historical price charts. Using fake money place the trade and see if that was a profitable entry point or not. This does not mean that being able to make profits using fake money will be the same as with real money. Things can be different in real life stock where the entry points and exit points have to be placed according to the fluctuating price range.
Risk management is yet another important factor that needs to be considered seriously by the trader. Start following the market in your spare time. You can wake up early and read the pre-market analysis of the stock you choose to trade. You can either choose to read books related to the stock market or just go to online websites that harbor tonnes of knowledge on stocks. when analyzing the market, the trader should be aware of both fundamental and technical analysis in order to make proper outcomes. If not a demo account, the trader can practice via paper trading. Paper trading does not trigger emotional trading as it only generates with actual profit and loss made with real money. It’s always best to take additional training on how stock market functions if you want trading as your career. Paying for research analysis programs can be highly educational and useful.