How To Do Stock Trading? !

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5 Mar 2024

Stock trading is a form of investment in which we earn profits by trading in stocks. But keep in mind that without proper knowledge it can be risky.

Stock trading involves buying and selling shares in companies in an attempt to make money on daily changes in prices. This short-term approach differentiates stock traders from traditional stock market investors who are in it for the long term.

While stock trading can bring quick profits to those who time the market correctly, it also carries the risk of substantial losses. A stock's price can rise rapidly, but they can fall just as easily. Therefore, it is important that you start trading only after being aware of the advantages and disadvantages of the stock market.

At the same time, beginning traders should trade in the stock market only by following some important advice given by financial advisors like trading with less capital, staying away from greed, etc.

To do stock trading well, it is necessary to have correct knowledge and understanding, for which you can learn stock trading through different mediums. After this, to start trading you have to follow 6 steps, which are as follows -

1.Open Brokerage Account

To do stock trading, you first have to open a demat and trading account, where you can trade in shares of any company. Stock trading requires funds for an account – this is a specific type of account designed for investing or trading.

If you don't already have an account, you can open one with an online broker in just a few minutes. But don't worry, opening an account doesn't mean you're investing your money yet. Once ready it gives you the option to do so.

2.Set a stock trading budget.

Now if your brokerage account has been opened, now you have to decide with how much money to start your stock trading journey. But you also know that there is risk in the share market, hence our advice is to start with less capital.

Because it is not the only rule to manage risk. Other do's and don'ts include -

•Invest only that amount you can afford to lose.
•Don't use money earmarked for near-term, must-pay expenses like a down payment or tuition.
•Therefore, come to the stock market with only that money which you will not need in the near future.

3.Learn how to use market orders and limit orders.

Once you have your brokerage account and budget, you can use your online broker's website app to place your stock trades. You will be presented with several options for order types, which determine how your trade plays out. But these are the two most common types:

Market Order:-

Buys or sells a stock as quickly as possible at the best available price.

Limit Order:-

Buys or sells stock only at or better than the specific price you set. For a buy order, the limit price will be the maximum you are willing to pay and the order will be filled only when the stock price drops to or below that amount.

4.Practice with a Virtual Trading Account

When we start trading with our own money in the beginning, we make many mistakes due to which we have to suffer huge losses. To avoid this problem, we should start with virtual trading in the beginning.

Virtual trades or paper trading allow clients to test their trading skills and build a track record before putting real money on the line. There are many apps and websites available for virtual trading on which you can practice trading for free by creating an account.

5.Understand the stock market

Before doing anything, we have to learn that thing, only then we are able to do that work, similarly, before starting stock trading, understand the basic knowledge of share market well and also the strategy necessary for stock trading. Learn what can help you make profits in the stock market. Below we have given you the complete process to start learning stock trading.

Follow this process to learn stock trading –

•Basic knowledge of shares
•Technical analysis
•Price action technique
•Strategy
•Mindset
•Money Management

6. Keep your attitude positive.

Being a successful trader doesn't require finding the next great breakout stock before everyone else. By the time you hear that a certain stock is poised for a breakout, there are thousands of professional traders, and the potential has already been priced into the stock.

It may be too late to make quick profits, but that doesn't mean you're too late to the party. Really great traders work on their mindset for years and keep themselves positive while trading. Therefore, develop the habit of keeping your attitude positive.

How to reduce risks in stock trading?

Whenever investors or traders come to the market, they think that if they get hold of a good strategy, then money will be money. And because of this mentality they lose their money. You have to learn to save your money more than earning money, only then you can survive in the stock market. Below you have been given some advice, please follow them.

1.Low position size

In the initial phase, you do not have much experience in how the market is working and at this time you are likely to make a lot of mistakes, hence the only way by which you can reduce your losses is to trade with less position.

2.Ignore 'hot tips'

People who post in online stock-picking forums and pay for sponsored ads touting certain stocks are not your friends. In many cases, they are part of a pump-and-dump racket, where people buy shares in a little-known, thinly traded company and hit the Internet to promote it.

As unknowing investors trade on the shares and drive up the price, they take their profits, dump their shares and send the stock back down to earth. Don't help them pick their pockets. Therefore, do not get carried away by hot ‘share market tips’.

3.Use stop loss

Stop loss protects a trader or investor from huge losses, sometimes it happens that we think that the trade setup is very good and hence we do not put stop loss and suddenly the market starts moving in the opposite direction to us and Our losses keep increasing. So use stop loss to avoid such losses.

To limit your losses by setting stop loss, it is important that you know the correct trigger price and trade in the stock market accordingly.

Conclusion

The stock market offers you different options for trading, it is only important to choose the right option as per your understanding and knowledge.

It is better that a new trader decides to trade in the stock market only after having complete knowledge of the stock market and its risks. To make your journey easier, you can take a stock market course.