No matter what type of investment you are trading into, it is very important first to educate yourself. Especially, if you are planning to get started with something as volatile as the stock market, the need to educate yourself cannot be overemphasised. Read this post to learn five important tips before you begin your stock trading journey.
The dramatic rise of the Indian stock market in the last few years has intrigued millions of new investors. But while every new investor/trader is very excited to begin their stock market journey, all the excitement fades away within a month or two after they start trading. Their enthusiasm often makes them forget the most important aspect of being a successful stock market investor which is,- to learn and educate yourself before starting to trade.
One cannot avoid losses without proper knowledge and a well-thought trading strategy. Once new traders start losing money, they are no longer interested in the stock market and start searching for other investment options. While there is no denying the fact that the stock market offers unlimited potential, you can only be successful when you actually know what you should do.
To help you begin your trading journey, we’ve created a list of some very important tips-
- Learn what Stock Trading is all About
While opening a demat account and trading is now easier than ever, do not jump to the step unless you have adequate knowledge about how the market works. From different industrial sectors, types of trading orders, short-selling, to the commission of broker, there are several things that you should understand to start trading successfully.
Fortunately, the internet is now filled with all the information that you’ll need to begin. Spend at least a few weeks on learning the basics of the stock market before thinking about opening a demat account.
- Selecting a Stockbroker
Once you’ve decided that you want to trade stocks, the first thing that you need to do is to pick a stockbroker. While there are now several stock brokers in India, select one that is reputed, has a reasonable brokerage, and offers online and mobile trading facilities. Know that most of the brokers offer a discount on brokerage if you deposit a higher amount in the trading account.
Many of the stockbrokers also offer free and paid seminars on stock trading which you can attend to sharpen your trading skills.
- Know What You’ll Do with the Stock
You can sell a stock within minutes after the purchase, hold it for a week or month, or even hold it for several years. You should know about what kind of stock market participant you’d like to be. The market is filled with traders who sell stocks as soon as they’ve achieved their targets and investors who prefer holding for long-term.
Before placing a buy order, you should always have a clear idea about what you’d do with the stock. Understand the risk and fix a target price at which you’ll sell the stock before buying.
- Select the Industry or Stock you Want to Buy
While short-selling is interesting, it is better to start with a normal buy order when you are just beginning to trade. You can use your professional experience to select an industrial sector in which you’d like to trade.
For instance, if you are in the IT industry, it’ll be easier for you to understand the functioning of IT companies. Think about why you are selecting an industrial sector or a stock before clicking on the buy button.
- Buy the Stock
If you’ve followed the steps mentioned above on how to trade in stock market, you are now ready to place your very first stock trading order. You can sell the purchased stock in a minute, hour, or a day if its price rises. If you are planning to hold it, you’ll receive the stock in your demat account generally in 3 working days.
Only experiment with short-selling, F&O, commodity and currencies after you have at least some experience in buying and selling stocks.
You cannot really master stock trading in a day or even a week or a month. Learning in the market is a lifelong process, and you can only get better with time. But if you are just beginning, it is very important for you to at least understand the basics of the market as it is only with the right knowledge that you can start this journey in the best way possible.