There are a few things that you should know before you invest in the share market. Investing in stocks provides high returns due to the power of the compounding effect. A trading and Demat account is a must to start trading in the stocks. Don’t worry! It’s not a cumbersome process and it can be opened very easily online and quickly with no hassle. We will learn the primary requirements to trade in the stock market.
Here is the Process of stock trading for beginners.
Open a Demat account:
To enter the share market as a trader or investor, you must open a Demat account or brokerage account. Without a Demat account, you cannot trade in the stock market. The Demat account works like a bank account where you hold money to use for trading. The securities you buy are maintained electronically in the Demat account.
Understand stock quotes:
The price of a stock moves on the basis of any news, fundamentals, technical analysis, and so on. By gaining knowledge about these aspects, you can enhance your knowledge of stocks and stock markets. This will help you to figure out the right price to enter or exit a trade.
Bids and asks:
A bid price indicates the maximum price you are willing to pay to buy a stock. The ask price is just the opposite. It represents the minimum price at which the seller is willing to sell the stock. To ensure a profitable trade, it is important to decide on the correct bid and ask price.
Fundamental and technical knowledge of stock:
Study the fundamental and technical analyses of the stock to plan your trading. Fundamental analysis evaluates security by measuring its intrinsic value. It considers various dynamics including earnings, expenses, assets, and liabilities. Meanwhile, the technical analysis evaluates the stock based on the past price and volume chart of the stock to predict future potential using different candlestick patterns, Technical Indicators, and Chart patterns.
Learn to follow stop-loss:
Volatility is an implicit characteristic of the share market. So, it is important for a beginner to understand the way of preventing heavy loss. While executing a trade, you need to set a stop-loss price to minimize the loss. Failure to put a stop loss may damage your capital heavily.
Have a Mentor:
The share market is unpredictable. Nobody can predict a stock price accurately. But taking advice from a mentor helps beginners make the right trading decision. A mentor guides you to make the right choice.
Start with safer stocks:
A big capital loss, in the beginning, may bring your confidence down. A wise choice is to start with the less volatile stocks. That may give you a slow start. But those stocks are more likely to sustain a good performance even in adverse conditions.
Capital is one of the key elements which decides the longevity of the stock market, Decide a decent capital and start trading. Always deploy funds from your savings and never invest borrowed funds into the stock market.