How to Start Trading in the Stock Market

“Are you willing to lose money on a trade? If not, then don’t take it. You can only win if you’re not afraid to lose. And you can only do that if you truly accept the risks before you.”

– Sami Abusad.

It is well-known that trading is risky, and success requires time, understanding of the market, patience, and discipline. Stock trading means buying & selling shares in the short term to make profits. Traders closely monitor these stocks’ short-term price fluctuations to buy low and sell high. Trading stocks may appear glamorous, but it is hard work and requires extensive research.

The stock market has different types of trading: intraday trading, swing trading, positional trading, and long-term trading.

Intraday trading entails closing all positions before the market closes in a single day. It is also known as Day trading. Stocks are purchased with the intention of profit rather than investment.

Swing trading profits from price changes in stocks or other financial commodities over a few days. It means buying and selling stocks within two weeks.

Based on your analysis, positional trading entails holding a share for a few months. Before purchasing a company’s stocks, extensive research and study are required, as trading involves long-term ownership.

Long-term trading refers to trading that extends beyond one day. They hold stocks for years, decades, or even a lifetime to create wealth for the long term.

Apart from this, there are

Basic requirements to start trading

Choose a SEBI-registered investment broker.
To begin trading or investing in the stock market, you must open a demat or brokerage account. You can only trade in the stock market with a demat account.
Link your trading account and bank account to initiate transactions.
Decide your trading budget and try to stick to it to avoid losses.
You should study. You can only participate in this show if you understand what stock market trading is.

The process of how to start trading in the stock market

Now that you’ve learned the fundamentals of stock trading, it’s time to start. Here are the tips to start your trading journey:

1. Open a demat account:

You’ll need a broker to make trades, so look for one you like and trust. There are many to choose from, each with its expertise. Select a broker who provides you with advanced tools, a user-friendly interface, unique features, etc.

If you intend to day trade, you may require a few additional features from your broker. Orders should be executed instantly with no intervention from the broker. Ability to quickly place, adjust, and cancel orders.

Open demo accounts with various brokers to try out different platforms. With trading platforms, stock trading has become relatively simple.

2. Set a budget for stock trading:

The most important rule before you start trading is to invest only the amount you can afford to lose. Create a budget considering your income, monthly household budget, savings, debt obligations, and current lifestyle expectations.

There is no pre-determined amount for trading, you can begin trading with almost any amount. But remember, do not touch the money you may need short or in the short term, like EMIs or any emergencies, etc. Whatever budget you decide on, try to stick to it. Also, choose a broker with low brokerage charges to save even more money. High brokerage fees can eat up your profits.

3. Get familiar with stock quotes:

The price of stock never remains the same. It fluctuates all the time based on news, events, economic events, etc. Learning more about these elements increases your knowledge of stocks and the stock market. This will assist you in determining when to enter or exit a transaction and at what price. There are times when a stock’s price suddenly escalates or plunges by 10-12% in a single day. It would help if you understood the reason behind that change and made trades accordingly.

4. Learn the types of stock analysis:

There are two methods to do stock analysis: fundamental and technical. Fundamental analysis analyses securities by reading the company’s financial statements to determine their intrinsic value. On the other hand, technical analysis is used to predict the future price of a stock by using different charts and indicators.

Trading is generally based on technical analysis, which helps traders decide when to enter and exit the stock. The two analysis styles are often viewed as opposing approaches; however, combining the two can help you gain a broader understanding of the markets, which can be used to predict your investment’s future direction better.

5. Use a stock market simulator to practice:

Before you begin your real journey, put your skills into practice in virtual trading. A simulator is an excellent way for novice investors to learn about trading. Stock market simulators allow you to experiment with new investing strategies without risking real money. There is no risk because the money used is not accurate.

You will learn how the market works and what investing style suits you the best. You will also learn the basic trading concepts, determine the effect of market volatility, and put your trading strategies to the test.

6. Begin your stock research:

When you’ve funded your brokerage account and are ready to make your first trade, it’s time to devise a strategy. Take it slow, investing only a set amount of money that you are willing to lose on one or two stocks at first. Before investing, conduct extensive research by analyzing the company, reading news and events, and reviewing financial statements and research reports. You can begin investing in a few stocks with a small amount of money. Profits from these slight investments can be reinvested in other stocks.

7. Stick to your plan:

Investing can be an emotional experience, especially for beginners. You may easily panic in just one wrong trade. That’s why planning how much you want to invest and at what price is critical. You should also decide on a strategy for when you should sell stock. It would be best to have a well-defined plan when you begin trading. Staying on plan and avoiding emotional reactions can be easily achieved using the right trade order type.

Traits required to be a successful trader

You need the necessary skills to be a day trader. Traders often have some natural characteristics to help them get started, but they must work on others.

Trading with a stop loss: The first and foremost rule is to avoid losing money. But if you’ve ever traded, you know how your mind can play tricks on you when it comes time to sell at a loss. Then, all of a sudden, you’re faced with the nightmare of a loss. Everyone goes through this while learning. However, successful traders are aware of their entry and exit points. They set their boundaries and stick to them.
Quality research and analysis: Successful traders know how to do solid research and analysis before trading. Successful traders hone their abilities to thoroughly research all information pertinent to the securities they trade – and, more importantly, to accurately predict the impact of that information on a specific market. Rather than focusing on how much money to make, you should focus on how to perform the right trade at the right time.
Patience: Trading necessitates a significant amount of waiting. As a beginner, you shouldn’t expect to make substantial profits right away. You need to be patient and comprehend what the markets offer and how they operate. Make consistent trading strategies, and you will slowly accumulate profits. Do not be hurried to take profits.
Discipline: The market provides an infinite number of trading opportunities. Even if you’re a day trader, your actual trading time is minimal each day. You must be patient and wait for trade signals the rest of the time. When you receive a trade signal, you must act quickly and follow your trading strategy.
Stay up to date: Any piece of market news can turn into an opportunity. You should know it beforehand to seize the opportunity. To surpass others in the competition, you need to keep track of all the happenings in the market and be adept at analyzing how each event will affect the market.
Do not get emotional: Many new investors can get depressed after a losing streak. During your trading career, the market will throw you losing trades continuously, and you need to bounce back from them. Getting losses is a part of the game. But you need to move on and continue following your trading strategy.

Wrapping Up

Trading from the perspective of getting rich quickly may be a bad idea. Stock trading is thrilling because it involves both risk and reward. Before you even place your first trade, there is a lot to learn and figure out. Remember that stock trading is a high-risk endeavor in which your money is always at stake. So, practice your trading strategies with paper trading, and over time, you’ll learn what works for you.

by Instockbroker Team | May 28, 2024