Stock Market! this is a place where you can earn money or wipe out your entire bank balance in minutes. Many wonder if it is a gamble or can we really earn? Investing in stock markets is really good if you choose a good company that has a growth potential. Before you invest dedicate enough time and do some proper research. Long term investment in stock market is as good as investing in real estate If you choose the right stock and holding it for proper amount of time after all you don’t need large chunks of money like real estate if you want to start with stocks. In this article let’s get into the basic insights of stock market trading and its realities and these apply for both Indian money market and global share market
Once you decided to invest then decide on what is that you want to invest in is it Equities, Stock Futures, Index Futures, Stock Options, Commodities, Forex.
Equity investments are far the best and safest to start with for beginner, also equity market is easy to understand and invest as these stocks won’t have a expiry value i.e. if you buy a share in any of the company you like, technically you own a part of that company and you can hold them for any number of days, years and you can buy any number of quantity.
Stock future is an agreement to buy or sell specified quantity of a company’s equity share for a future date. These contracts have a fixed lot size, monthly expiry date and unit price quotation. Let’s imagine there is a company called XYZ whose size is fixed to 500 shares per lot, and each share costs 100 Rs /- if you want to buy a future contract of this company then you forced to buy a minimum of 1 lot i.e. 500 shares at a cost of 500*100 which is 50000 Rs /-. Remember you don’t have anything like a minimum buy quantity in equity and also if you are a beginner and unsure about the stock movement you will lose large. If share the value decreases by 10 Rs /- per share, then you will lose a total of 5000 rs/ – plus brokerage charges.
These are exactly same like futures but here you can buy the countries trading index instead of a single companys equity share unit. Rhe indian indices are nifty and banknifty while the Singapore index is sgx nifty.
A stock option is the right to purchase a specific number of shares at a fixed price over a certain of time at a future date. In other words, it gives the owner of the option the ability to purchase shares at a future date for a specific price regardless of what the market price is. Buying options is extremely dangerous and might wipe out your entire money in minutes, In India market we have two exchanges NSE ( National Stock Exchange), BSE ( Bombay stock exchange) but only NSE offers to trade in stock options. Buying options , studying option chain takes a bit of time to understand as you need to monitor the index live, but once you start understanding option strategies sky is the limit for your earnings and the vice versa applies for you losses.
A commodity market trades in primary sectors like gold,silver ,metals and oils instead of manufactured goods and products. Commodity market in india is diverse and trades from 10:00 am to 11:30 pm. So , its very difficult to trade for such long period of time as one need to be super skilful and active for such long hours in the market to encash every opportunity.
It is currency trading which is global and decentralized it involves all aspects to buying, selling and exchanging money at pre-determined prices. Let’s avoid this for now as we are discussing regarding basics and this is not really beneficial as of now as we are discussing the basics.
Now , as we have seen the kinds of stocks we can invest in lets now look into the prerequisites that you need to start trading.
1. Demat and trading accounts
You need to have a valid Demat account to hold your shares and a trading account to initiate the buy and sell transactions with the stock market exchanges. In India if you are below 18 years or age of If you don’t posses a PAN card you are not allowed to open trading and Demat accounts. I recommend you to open account with a good brokerage house such as Zerodha or Upstox as they provide you a smooth trading software which makes your work half done to initiate transactions.
2. Savings Bank Account
This is required to transfer money into your Demat Trading Account. Most brokerage houses accepts money only through online mode of transfer and offcourse any profit that you earn by share trading is also transferred only into a bank account.
You do need a proper laptop or a mobile phone (android or ios) to install the trading software and to start trading. Most of the brokerage houses provides their own trading apps in windows, android and IOS trading platforms and using these apps gives you an better enhancement rather than direct web access.
4. Proper Internet Connection
Yes you a need a proper internet connection and indeed this matters a lot. If your internet connection is slow or if it gets disconnected frequently be ready to loose big. Seriously internet connection speed and latency does matters. You should use a good connection with low latency so that your trading software shows the latest prices of your stocks and always be in sync.
5. Research and Information
You need to have proper info about the stock you plan to buy. Stock market is not like a quick get rich scheme, do some proper research , dedicate sufficient time, don’t depend on free intraday tips, stock recommendations, do proper stock market analysis before you go on.
6. Have proper Buy, Sell & Stop loss prices
Buy is the price at which you decide to take an entry buying a sock, sell is the price at which you want to exit it after accumulating profit. Stop loss is the price at which you want to exit the stock without holding further if things doesn’t go as you plan
Stay focused and be disciplined always have a clear plan to execute before you trade, never be greedy and over trade . Discipline is the biggest reason for failure in stock markets. Always stick to your buy, sell & stoploss prices. Never buy too high and try to catch a running iron or sell off too quick or late mostly never ever edit your stoploss unless you are 1000% sure.
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