Want to invest in the stock market? Can’t figure how? Can’t stand your friends that make money off it? Look no further! This is an article on How To Trade In The Stock Market. But let me first tell you the basic terms and things about the craziness.
Demat account is an electronic account that holds all of your financial securities in electronic form. Demat is short for dematerialized. This is how securities are traded in the modern market, as opposed to earlier times when they were traded physically in the form of certificates.
Trading is either buying or selling securities. The person who trades is known as a trader. There are different types of trading like scalping, day trading, swing trading, position trading, etc. Each trading type has its own pros and cons. So you need to choose the type of trading that you need to do according to your need.
Bull and Bear
Bull is the positive phase of any market. Bear is the negative phase of any market. A smart investor buys in the bear phase and sells in the bull phase.
The market where the company issued its securities for the first time. Initial Public Offerings take place in the primary market.
This is the market where securities are traded after their IPOs. This is the market where millions of securities are traded daily.
A type of trading wherein a trader buys or sells securities within that trading session or trading day. In this type of trading, the main aim is to profit from
day-to-day price fluctuations. Investors need to have a good knowledge before investing.
The total number of securities that a person holds in his/her portfolio. An average portfolio usually has at least 5-10 securities.
Let us begin with the topic “HOW TO TRADE IN THE STOCK MARKET”
1. Create a demat account
The first and foremost step would be to start your demat account to buy and sell securities. You can create a demat account easily with any major bank. Tons of brokerages will help you. Once your demat account is created, you can easily buy your first security. Once demat is created, appoint a broker too. Creating a demat account is one of the easiest yet most important steps if you want to trade.
2. Analyze Your Aspects
Analyze various aspects like your budget, risk tolerance, main requirements, type of sector, type of security, and so on. Analyzing these aspects will help you in making different decisions. Once you analyze these aspects, it will be a lot easier for you to choose from the sea of securities traded in the stock market. Every aspect has its importance in various stages of investing. E.g., the Main requirements will narrow down your choice of securities because not every security will fulfill your main requirement.
After creating a demat account, you have to choose those stocks (from the wide range of stocks) that fulfill your requirements. Choose a good amount of stocks (say 10). These ten stocks should be carefully chosen and observed. The biggest advantage of a good portfolio is the stability of growth and income.
There are a few methods that can help you to create a great portfolio for yourself. Diversification is the first and most basic one. Don’t choose stocks that are highly related to each other or are dependent on each other. Try choosing stocks from various sectors, have various capital requirements, and even have a difference in their geographic location. The correlation will be your best friend while making a hot portfolio.
To learn more about making the ideal portfolio and various risk aversion methods, I suggest joining some stock market course.
Once you have made your ideal portfolio, start observing the stocks in your portfolio daily or at least when you are free at a particular time of the day. This will not only help you in keeping track of your stocks but will also keep your knowledge and happenings of the market-fresh. Keen observation led people like Buffet and Graham on their path to success and tons of money.
Another point why observation is important is because it enlightens you for your other decisions. If you have keen observation, you can easily point out any irregularities or abnormalities in the market and save your wealth. Observation will not only make your wealth but save it too. Hence observation is really very important if you want to make good money in the stock market.
5. Discipline and Patience
You must be wondering why values like discipline and patience are important. In the craziness of the stock market, these two will always be there for you and will bail you out on countless occasions.
Discipline in terms of regular investing and observation. Discipline is really important to make money in the stock market. Regular investing helps reduce the impact of volatility on large investments and reduces the investment risks simultaneously.
Patience in terms of returns. The stock market is not a magic land, where people get returns in the first 5 minutes, days, or even months. One may have to wait for a year even. The stock market favors people with patience. Another way of looking at it is being patient when the stock price falls, and people are rushing to sell the stock. Don’t be so hasty. If it is falling below your risk tolerance level, then you may sell it.
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6. Read Books On Stock Market
Reading books written on stock markets will help you gain a new perspective and help you understand the various situations and scenarios in the past because you know – history repeats itself. There are dozens of books that you can begin with, and it is completely up to you. The books that I love are – The Intelligent Investor, Reminiscences of a Stock Operator, Market Wizards, A Random walk down Wall Street, The Little Book of Common Sense Investing, Trading in the Zone and others. These books have stood the test of time. Try to read as much as you can.
7. Take Courses
The best way to invest in the stock market is to study it first, which is not easy. One needs to know the different aspects and theories of the stock market. To know all the methods and technicalities of the stock market, you have to take good quality courses on the stock market. A good course will help you to analyze the stock market and make profits from daily trades. There are many good stock market courses available in the market, but I will highly recommend stock market courses by The Thought Tree as they are best in the business.
These were the initial steps to a very long staircase that is the stock market. I will suggest (again) the readers take good stock market courses before investing real money in the craziness. There is no certainty what the stock market holds in store for the investors. It is similar to a baby; you never know when the baby goes off. Nevertheless, I hope you find your path to riches and find some motivation from this article.
Thanks for reading! Happy learning.