If you are a beginner in stock markets and want to know how to start trading stocks, then this is brief guide to help in getting started.
Stock trading in stock markets is a highly rewarding business idea. This is possible if done with proper planning and discipline. It is quite popular among people as it is a means of making handsome money in the quickest of the times.
However, the situation becomes confusing when you are a beginner. You are totally new to stock trading and the stock markets and want to start trading. As a beginner,most of us don’t know how to start start trading stocks.
It is also possible that you enquired to any relationship manager at broking house to know how to trade stocks. In return, you were handed few business magazines and newspapers and asked you to keep reading them for 5-6 months.
Of course it is important but it didn’t answer you how to start trading stocks.It happened to me also in my earlier days. So I decided to write this tutorial to help you know how to be a stock trader at home if you are also new to trading.
Table of Contents
How To Start Trading Stocks – The Requirements
There are some pre-requisites needed to be completed for getting started trading stocks. This is like acquiring infrastructure for setting up a business. You may know that trading is the best business in the world. Let us find out what you would need to start trading stocks :-
First of all, for getting started to trading stocks, you need a trading account. There are so many broking houses available around us which can provide you an online trading account. Look for the a stock broker or a broking house in your vicinity.
They provide services in securities like stocks, mutual funds, commodities or currency trading.You can search internet now a days to make it easy to find leading stock brokers in your region.Compare their account opening fee,annual fee and most importantly brokerage rates.
Get your account opened with the house which suits you best. Although it is human tendency to look for the lowest rates but I would advise you to look for the quality of services offered also. After all,quality has a price.
Now-a-days all the trading accounts offered are online.These are also known as Demat accounts because the stocks held by you in the account are in Dematerialised form and not in physical form as in earlier times.
You can also have offline accounts too if you are not interested in placing orders by yourself.In offline accounts,you instruct someone else to place orders for you.He can be a broker or a relationship manager.When using offline services,you end up paying higher brokerages as it includes fee of your relationship manager too.
It is best if you use online accounts and do the trading by yourself. Brokerages are also significantly lower than offline trading.
Computer with Internet Connection
When using an online trading account,you’ll need a computer or laptop with a decent internet connection for doing the transactions.
Smartphone are also good option although you can not do everything with them.It is advisable that you use an internet connection having decent speed.Slow connection can adversely affect your trading especially when placing market orders.
In your Demat account,you’ll see all the options of buying and selling the stocks as per your trading plan.
Charting software is an important part of your trading business.Most of the brokers provide charting software also when you open account with them.
They can be free or with a very nominal fee and are downloadable from a link in your trading account.With the help of charting software,you will be doing your Technical Analysis by looking the technical charts of the stock in which you want to trade.
Chart analysis helps you to decide your entry and exit price in any particular stock when the market is open.
Charting software shall be of no use if you are not familiar with the basics of Technical Analysis.Later is the technique of forecasting the future price actions of any stock or security on the basis of technical charts. These charts are drawn on the basis of past price movements of that stock or security.
You should be aware of the basics of the technical analysis at least so as to minimize your risk and maximize your rewards.Finding the support,resistance and trend of the stock movement are important aspects of the technical analysis.
With technical analysis you can find your target price and stop-loss price.Target price of a stock is what you expect to be achieved after you enter a trade and buy a stock. Stop-loss is stock price is up to which you can bear the loss when stock starts falling.
Suppose a stock is trading ₹ 410 price. You expect it to move higher towards ₹ 430. This is your target price. Now you do not want to loose more than ₹ 10 per share if it starts falling. You place a stop-loss at ₹ 410. If the stock does not move higher and starts falling towards ₹ 400 or lower, system will sell your shares as soon as the prices reach ₹ 400. So have stopped your further loss.
Learn to identify the chart patterns to make your trading strategy work in your favour. Chart patterns project you the target prices and stop- loss prices for a stock. Supports and Resistances to stock prices on technical charts make your target prices and stop-loss prices.
Trading system helps you build a system to get buy signals and sell signals in stock trading. The buy and sell signals give you appropriate entry and exit of prices from a trade. With the signals you can keep your risks to the minimum and maximise the profits.
To build a trading system, you would need technical charts along with technical indicators and oscillators. You can use a charting software to build a trading system appropriate for you.
You should learn to identify the technical chart patterns which indicate buy or sell signals. There are several types of chart patterns like triangles, wedges, head and shoulders patterns,flags and pennants. Along with these patterns, you can use technical indicators like relative strength index (RSI), moving average convergence divergence (MACD) et cetera.
Professional traders Jews there are trading systems to plan their prayers. Having a appropriate trading plan gives you appropriate buy and sell signals and keeps the emotions like greed and fear out, during a trade.
Practice Stock Trading
After completing all the necessary requirement, you should practice stock trading to have an idea how does stock trading work. Practice is the best way to learn stock trading.
There are several stock trading websites where you can practice stock trading. Although most of them charge some fee, ICICIDIRECT offers free virtual stock trading where you can practice to stock trading.
Just visit the above link, register your self and login. Place your order in Equity section and you are set to go.
These are the basics you need to do before you should start your Trading Business.Any enquiries are welcome and I shall be happy to assist if needed.All the best!