Investing in the stock market can be a very profitable venture, but it is important to remember that any investment is involved. There are many online portals with which you can trade stocks, and with a bit of due diligence on your part, you can find the one that best suits your needs. Rather than jumping in feet first, use the following tips to help you get started in online stock trading:
Understand The Difference Between Trader Or Investor
The first step is to understand the difference between traders and investors. Traders buy and sell stocks with the intent of making a profit in a short period, while investors buy stocks to hold them for the long term. You should be aware of the distinctions between the two to figure out what you want to do. This is because trading and investing strategies are ineffective for investors and traders, respectively. So, decide right away since this will serve as your stock market foundation.
You Need To Open A Demat And Trading Account
Once you understand the stock market and have developed a strategy, it is time to open a trading account. This can be done with any online broker, and all you need is some basic information like your name, address, and contact details. Check out this website before deciding on the platform for your trading. You will also need to open a Demat account, where your stocks will be stored. This account can be opened with the same broker as your trading account or with any other bank or financial institution that offers Demat services.
Understand The Basics Of The Stock Market
Once you have a good hold of the basics, you will move on to more specific concepts like derivatives and capital market instruments. You can find a wealth of information on the internet to learn more about the stock market. This includes understanding:
- The different types of stocks available for investment
- The role of the stock exchange in the stock market
- How stock prices are determined
- How dividends and earnings are paid out to shareholders
Have A Strategy In Place
Having a strategy is vital when it comes to trading stocks. Your strategy should answer questions such as:
- What stocks do I want to trade?
- What are my entry points and exit points?
- What is my risk tolerance?
- What is my time horizon?
Developing a strategy ahead of time will help you stay disciplined while trading and avoid impulse decisions. It is also important to remember that your strategy should be tailored to your risk tolerance and investment goals.
Select a Stockbroker
One of the most important decisions you’d be required to make at the start of your trading journey is to pick a stockbroker. There are several stockbrokers, and the selection can be difficult for beginners. An excellent way to start is by identifying brokers who offer free trading and research services. Once you have shortlisted a few brokers, it is essential to compare their features and choose the best suits your needs.
Some of the factors you should consider while selecting a broker include:
- The type of account you want – regular or margin
- The services offered – trading, research, portfolio management, etc.
- The minimum amount required to open an account
- The commissions and other charges levied by the broker
- The geographical reach of the broker
Fund Your Trading Account
Before you can start trading stocks, you will need to deposit money into your trading account. The amount required will vary from broker to broker, but most require a minimum deposit. You can fund your account through net banking, NEFT, cheque, or demand draft. Be sure to keep in mind the cut-off timings for each mode of payment so that you don’t miss the deadline and lose out on potential trading opportunities.
Get Started Trading
Now that everything is in order, it’s time to start trading stocks. But before you do, be sure to familiarize yourself with the different types of orders available to you before placing them in the market. There are three types of orders:
Market Order
A market order is buying or selling a stock at the current market price.
Limit Order
A limit order is to buy or sell a stock at a specific price or better.
Stop-loss Order
A stop-loss order sells a stock when it reaches a specific price.
There’s no room for guesswork when it comes to stock market trading. It would help if you had a clear understanding of how the stock market works, what affects stock prices, and how to execute orders. Only then will you make informed decisions and succeed in online stock trading. And by following these tips, you will be well on your way to becoming a successful trader.
