Do you know how to trade in the stock market? Stock market trading promises a freeway to earn wealth. It is the freelancing or trading opportunity that assures huge profit if you know the tricks. However, stock market trading is not free of risks. It is a volatile earning option.
A stock market trader needs to be prepared for frequent ups and downs or profits and losses in the path. If you want to be successful and enjoy enormous profit, understand how the world of trading works.
If you are new to this field, we have the perfect stock market guide for beginners in this article.
What do you Understand by Stock Market Trading?
Stock market trading essential means purchasing and selling bonds and shares in the market on that very day. To understand how trading works, you first need to know the primary and secondary markets where you sell the shares.
Primary market: The primary market is where firms provide collaterals or securities and extend the offer to the public. In primary market trading, there is a transaction between the buyer and issuer of securities.
Secondary market: The secondary market is the place from traders purchase and sells primary market-issued shares. Here the transaction happens between the buyers and sellers in the market. In a secondary market transaction, there is always a broker or exchanger to work as an intermediary.
When you purchase a stock or share and sell it on that very day, it is known as an intraday trading transaction. Irrespective of what transaction happens, a trader ultimate books a profit or a loss each day.
7 Steps of Becoming a Stock Market Trader
If you are new to stock market trading, we have the journey to becoming a trader in 7 simple steps.
Table of Contents
1. Create a Demat Account:
The stock or share market journey as a trader starts by opening a Demat or brokerage account. A Demat account provides the rights of trading to a trader in the stock market. It is similar to a savings bank account. The only difference is that it is an account to hold your trading money. You maintain your trading securities electronically through a Demat account.
2. Understanding the Stock Quotations:
Fundamentals, news, technical evaluation, etc., determine a share or stock price in trading. To understand the stock market and a stock price, we recommend acquiring knowledge about these fundamentals and market analysis. Once you understand the basics, it becomes easier for you to understand if you have received a correct quotation for your stock and if it is worth trading the share.
3. Bid and Ask Price:
When you see a bid price, it designates the maximum amount you are inclined to pay for purchasing a stock. The asking price is the opposite value. Ask price represents the minimum value of a stock at which the seller is prepared to negotiate. To secure a profitable deal, it is essential to understand and determine the correct value for the ask and bid price.
4. Technical and Fundamental Understanding of Stock:
To create a plan of action for trading, you need to study and understand the technical and fundamental scrutiny of stocks. While the elementary analysis assesses collateral by computing its intrinsic values, a technical assessment evaluates stocks considering their past volume graphs and pricing for predicting future possibilities. The fundamental assessments consider different dynamics for this prediction like the assets, liabilities, incomes and expenses.
5. How to Avoid losses?
Before you join the share market trading, it is worth knowing that it is highly volatile from its core. To ensure that the volatility of the share market doesn’t lead you to losses, you need to understand different ways of preventing it. Establish a stop-loss pricing on your shares while you place a deal. Fixing a price prevents loss in most cases. Your capital can get heavily damaged if you fail to place a stop-loss price on your share.
6. Consult with an Expert:
If you are new to stock market trading, we recommend consulting with an expert on the stocks, shares, market scenario, and bidding. It is a volatile market with a high scope of loss. Accurately predicting the price of a stock is difficult with proper guidance. An experienced trader can guide you as a beginner to make correct trading decisions.
7. Choose Safer Stocks for Starting your Trade:
People investing in bigger stocks without understanding the strategies of the stock market often face huge losses. Such loss while you begin your trade life can shatter your confidence. Hence, it is always wise to choose a stock with less volatility. You might start with slow trading, but the chances of loss are less. These stocks boost your confidence and performance. You may invest in volatile shares once you are confident in the matter and have a better understanding of trading.
Becoming a successful stock market trader is tricky. But baby steps by holding an expert’s hand can lead to success in no time. Understand what is share market is, how the bidding process works, and which stock has better potential. Gathering enough knowledge about the market is the key to beat its volatility.