Stock Trading for Beginners ?? Yes, there is nothing wrong in stock trading for beginners if and only if you have spent enough time in the stock market and learned.
Because this is not the first step to start in the stock market. Stock trading for beginners means when you start trading in the share market. This does not mean that when you start to invest in the share market.
In simple terms, if investing is a natural way and the very first step of working in the share market and making money, then stock trading is an artificial way and the last step of your share market journey.
Artificial, because the concept of stock market was entirely based on investment. And much later, the concept of trading came.
What is Stock Trading (Online)?
Nowadays, it is useless to say offline term for stock market. Because all the activities related to the stock market in the world are now online.
The terms offline trading are occasionally used by local brokerage companies. Which means the service, call to trade, they offer. Where you call and ask them to buy or sell a deal (shares).
The stock market mainly provides you the opportunity to earn money in two ways – by investing and trading.
Trading in share market is done in many ways depending on the time frame or some other conditions. Such as day trading, swing trading, future trading, option trading, positional trading. One of them is stock trading.
By the way, investors are those who buy a stock for a long time. They sell it after many years according to their convenience and need. Sometimes they even gift these shares to their next generation.
But if the same investor buys these stocks and sells them very often in a short period of time, we call it a stock trader. And this process, which may have a chance of making profit within a few minutes, a few hours or a few weeks through buying and selling shares, is called stock trading.
However, due to very high and sometimes rapid fluctuations in the share price, there is a possibility of considerable loss in share trading.
Why to do Stock trading?
Now you will ask why do people do stock trading when there is a high risk of loss of money in stock trading? You must have heard a saying – no risk then no reward.
The benefits of share trading can be summarized as-
- No more money needed – Many brokerage companies facilitate their traders in the form of intraday margin money on their available funds. You can get upto 4 to 40 times leverage on your available funds. (I don’t suggest this)
- Time saving – According to your pre-planned strategy, you can earn money in no time. (It may not happen always)
- No need of fundamental analysis of stocks – A fundamental analysis of stocks is necessary before stock investing. But stock trading does not require any fundamental analysis. Here you are more focused on technical analysis.
- Trade anywhere – You can do stock trading from anywhere if you have an internet enabled mobile phone or laptop.
- Great profit potential – stock trading can be manifold beneficial than stock investing. Let us understand this with an example.
Imagine that you invest one lakh rupees in a single share in the stock market. And on that you get a profit of 15%, then your annual return will be Rs 15,000. For this you will give one year time.
Now think from another point of view.
Suppose you trade in the same stock under a particular strategy, daily or intermittently, with the same one lakh rupees. If you do this throughout the year and assume that your profit is even half a percent.
And if you succeed 100 days out of around 230 trading days of the year, your return will be 50%. In this assumption your annual return is Rs 50,000. This is the potential of stock trading.
This is the reason traders are eager for stock trading.
Why not to do Stock Trading?
Remember that if stock trading was so easy and profitable, why would people become investors !!
The reason is clear that making money from stock trading is not easy. This is quite risky where there is a fear of loss of your entire capital.
You have to be disciplined to become a successful trader and follow your own trading rule with proper knowledge of stock trading.
You should know that the percentage of successful traders in the stock market is quite low. You can read main reasons of failure of a stock trader in the post – Best Strategy for Intraday Trading
The market guru of Sir Warren Buffett, Mr. Benjamin Graham has described share trading as grossly unfair. In his words – many things are very bright in the stock market which tempts us. But we should avoid it.
When to Start Stock Trading?
I would like to say clearly and repeatedly that you should not do stock trading until you learn it well. You should learn how to start making money by investing in the stock market. When you start understanding stock market problems.
When you start understanding the performance of stocks listed on various stock exchanges / indices like NSE-Nifty and BSE-SENSEX. Let your four to five years go into the stock market. Now you can think to start stock trading.
Types of Stock Trading
Depending on the timeframe, share trading can be done in several ways –
- Scalping – Scalping is not just about everyone. Since it is based on subtle fluctuations in the share price, where a trader tries to make a profit. Here you make a position only for a few seconds or minutes.
- Day Trading or Intraday Trading – As indicated by the name, your trading is valid for single day trading hours. You can initially buy or sell a share and then you have to square-off your position. Time to square-off your intraday position is decided by stockbrokers too. In Indian Stock Market squaring-off time is almost 20 to 30 minutes before closing of market.
- Swing Trading – It takes moderate time of trading. You keep an eye on the technical developments in the price of the shares. And as soon as the trend reversal or swing is predicted, you make a position.
Stock Traders’ Choice
The biggest difficulty before a stock traders is that they will buy or sell a stock? They have only two options to initiate their trade. If you buy a stock it is termed as ‘To Go Long‘ and if you sell a trade initially, that mean you are doing ‘Short Selling‘.
How to Start Stock Trading?
Some common routes you should follow as a novice. Because these path are proven and faithful.
1. Opening of a Trading Account is must
You should have a trading account as well as a demat account with any brokerage companies to work in share market. I will discuss later how to choose a best broker and the best trading platform to do share trading efficiently.
Angel Broking Pvt Ltd and Zerodha are my favorite broker firms.
2. Learn Basics Of Share Trading
Learn Share market terms and some basic approaches like fundamental analysis and technical analysis of stocks. It will give you a better understanding of shares and their price movement.
3. Select Shares with High Volume and Market Capitalization
Gradually you will be able to know the effect of volume on the stock price movement. Higher market capitalization gives more liquidity and safety to your trade.
4. Don’t Use Intraday Limit or Margin Money provided by Brokers
Always use your money in the stock market and use only 10% of that money for share trading. People say that the stock market should start with a little money. This is correct. But stock trading should not start with less money. There should be sufficient amount in your trading account.
5. Do Paper Trading And Practice on Virtual Trading Platform
In fact, before starting stock trading, you should do paper trading and estimate yourself. Nowadays, many free virtual trading platforms are available where you can practice trading.
My way to start stock trading
It is my personal suggestion that every beginner should start their share trading journey in this way –
Conclusions
Stock trading is very risky. It is not necessary to do it. Even then, if you want to do it then there is no harm. First learn and then do it carefully.
