Trading (most preferably online) has become one of the most common ways to earn with your saved income. Online Trading has now become an asset for the earning class who believe in investments rather than keeping cash. Moreover, there are several options available on the internet, from which you can learn trading. This method is gaining popularity as it offers high returns to investors who purchase the shares of the companies. Furthermore, these investments are in the form of stocks, bonds, and commodities in different companies. The technological advancements in India have made it easier to trade and invest in various companies.
However, as a beginner, you ought to be aware of a few details about trading to avoid any unfortunate events. In this article, we’ll discuss some basic information about trading in India and the associated risks.
What is Trading?
The main objective of Trading is to earn profits by exchanging services, goods, or financial instruments through investments. For instance, the exchange of returns and investments in the companies is the concept of stock trading, which is conducted through a stock exchange. Earlier, this method of trading was foreign because of the lack of facilities. However, as technology has improved, trading can be done online without any hassles of accessibility issues. It can be done through your smartphone, even in a crowded space, or your laptop.
What are the steps to start trading in India as a beginner?
- To start trading, you first need to find a good Broker who is registered with SEBI. They help in beginning the trading process, with reliable customer support and competition in the market.
- Open a demat account after registering yourself for trading. It will ask for some details, such as a PAN card, residential address, and ID Proof. These accounts are necessary as they handle the stock trade without any difficulties.
- Log in to your demat account and share some funds for trading through internet banking or UPI for faster processing.
- Now you can start your journey of stock trading by using your trading account and the broker app. Research stocks, check their live updates, and be aware of market trends to trade without losses.
What are the types of Trading you can do in India?
Intraday Trading
Intraday Trading is when you trade with the funds for a single trading day and withdraw them before the stock market closes. Moreover, it is a low-risk method that allows free movement of funds to investors.
Scalping
Scalping is more like a technique where investors put their funds in dozens of companies to collect more profits. However, the investment in this method is only made for a few minutes to achieve maximum profit.
Swing Trading
While the other trading techniques are conducted in a day or a few hours, this method is for a few days or weeks. Therefore, investors attempt to achieve maximum output from a short-term investment in the companies.
Momentum Trading
This trading technique does not involve investment according to the day counts. Moreover, it continues with the flow of the upward and downward movement of stocks in the market. If the stocks are falling, then the investments are withdrawn to capitalize the funds for a benefiting company.
Position Trading
In this method, the stocks are invested in a company for a long period. Moreover, the capitalization is directed to a company that expects considerable growth in the future. Even if the risk is high, it offers decent returns, which attracts investors.
What are the advantages of Online Trading?
- No third party is involved in the online trading between companies and investors. Moreover, investors can access the stocks at any hour of the day just by opening their trading account.
- As the mode of trading is online, it saves you the cost and time for completing the paperwork formalities. Moreover, it reduces the inconvenience of buying and selling stocks that occurs if not trading online.
- It nullifies the payment that was earlier paid to brokers to facilitate the trading process.
- Additionally, you can find online resources to understand the workings of the stock market. This way, you can get some insights into the types of trends in the stock market and the ways to tackle them.
Regular terms used in Trading?
Stock:
Whenever you talk about stocks, understand that you own a portion of the company. This is because the companies release some shares that entitle you to a portion of the company’s profits.
Share Price:
The shares released by a company take a value based on their market demand and supply. Therefore, the price of a share keeps fluctuating in the stock market.
Market Capitalization:
A company can release only the shares registered in its lifetime, until updated. Therefore, the company’s market capitalization is determined by the number of shares in a company multiplied by its market value.
Dividend
The shareholders are paid a return after the maturity period, which is paid in cash or shares, and is referred to as a dividend.
Bull Market
We use the term Bull market, when the market is on an upward trend or is anticipated to rise in the future.
Bear Market
We use the term Bear market when the market is on a downward trend or is anticipated to fall in the future.
How to Open a Demat Account?
- The first step to a Demat Account is to find a broker that is reliable and verified. Moreover, you should research to see if the broker has faced any issues of data breaches in the past.
- After you are sure about a broker, they will help you create your Demat Account, which is used for trading.
- Apart from a demat account, you have to create a trading account to buy or sell stocks in the market, which will be shown on the demat account.
- Moreover, you have to pay a brokerage fee to the broker you are taking help from for the creation of the accounts.
- You will fill out a form after you open the Demat and Trading Account section in the broker app. Furthermore, it will create your Demat and Trading Account, where you can store your shares and trade.
- Every day, a contract note will be released by you, which will contain the summary of the day’s trade. Therefore, it is usually advised to check it each day so that any issues in the note can be addressed.
What are the steps to open a Trading Account?
- Just as in a Demat account, you should find a broker that is verified and trusted with the user’s information. Moreover, this broker will play a role in opening your trading account, as well.
- Apart from that, the trading account is required to buy and sell stocks in the market to collect profits. Afterwards, the shares purchased by you will be securely saved to the demat account.
- Moreover, you should always check the brokerage fee of the application, as it will be required when ordering.
- After choosing the broker, the main step to open a trading account begins. An online application will be shown on the screen, which you have to fill out by entering your details.
- You have to digitally sign the form to finally submit it.
- Afterwards, use the login details provided to you by the broker to log in to your account and start buying and selling stocks to earn profits.
- You should take care of the contract note as mentioned while opening a demat account.
Conclusion
Once you understand the basics of stock trading, you will be able to make decisions not emotionally but decisively. It is not a difficult concept, but it requires more intellectual decisions than emotional ones. This is because the decisions that are taken emotionally cloud the real judgment of our mind. Moreover, you have to strategize and prioritize your risk factors and trading type to continue trading. Apart from that, the internet is flooded with resources that can help you learn the workings of the stock market. This would help you to understand the basic terminology of the stock market and the bids raised by companies.
