Stock Market is a place where buyers and sellers of stocks come together and decide a price in which they buy or sell their stocks. Stocks markets are physical market in which trading of stocks happen on the trading floor. But eventually the markets have become virtual or online which has huge computer networks which record the transactions or trading electronically. It’s a secondary market where sellers sell the stocks which they own to potential buyers.
Stock trading means trading of stocks like buying and selling of stocks on the same day or holding the stock for 2-3 days before selling. Buying and selling of stocks on the same day is called intra- day trading while holding the stocks for some days makes it swing trading. Stock trading is a risky business. Investors are attracted to share trading is because it is a quick money-making business.
When the market is volatile one can earn huge profit or can have huge loss. So, one must have knowledge of technical analysis, one must have enough capital with him, and one must have opportunities to explore. The returns from this trading depends on the risk that is taken. One can get 3-4% profit in a day and incur losses also same way.
There are lots of tips that one can get in trading. But most important thing one must have while trading is Discipline. Investor must have discipline. Emotions don’t work out while trading in market. Greed makes you wait for the stocks to rise and one does not book profits in this way one loses out if the stocks fall. And when the prices fall the impatience and fear makes one sell the stocks without booking profit/ loss.
These are few steps or tips that needs to be taken / understood while trading in stock market:
- Discipline- Investors must identify how much loss one can handle according to that must fix a stop loss order which can avoid big losses. Whenever an investor is investing in a company’s share or stocks, he must set a stop loss of certain price so that the investor does not incur loss, as when the price falls it will automatically sell the shares.
- Skill – One must have skill of trading. Trading is a skill which can help an investor to get in the market fast and get out fast. One must know to spot amateurs and take position and trap them. It is seen that amateurs make wrong decision to buy.
- Planning – One must have proper planning by focussing on few stocks and knowing which are profitable.
- Capital – Minimum capital is required for trading. A minimum of 2 lakhs capital can give a meaningful gain. This capital should not be from one’s savings or borrowed. Investor can trade with less capital but the volumes of purchase will give gain.
- Stock volumes – The volume of shares is important. Minimum of daily volume of 5 lakh shares can give you gain. Those investors investing for the first time can begin with Nifty -50 stocks.
- Price range – The price of the stock if is minimum then it’s good for investing as it is better than the shares with high volumes with no price movement. ‘
- Timings – Timing of trading in stock market plays an important role. It is believed that in Indian stock market morning 9 30 to 11 30 am is good for trading as the market is volatile at that time.
- Volatility – Volatility of stock can be found in trading software. One must look for positive beta of 1 or above for trading. When the market falls by 2%, the stocks also fall by 2%, this means that when the beta is 1 or more the stock will move according to the market changes. But one must not look for beta 2 or more than 2.5.
- Demand and supply of stocks- One must know the demand and supply of individual stocks. One can know this only if there is enough technical analysis knowledge. When the stocks of a company are up for sale and it is more then it is believed that it should not be bought and vice versa. And the demand and supply of stocks cannot be known only by bid or ask numbers.
- News flow – Lots of changes in the market happens when there is certain news in the market. It is believed that one should avoid trading according to the rumours as the stock prices take less time to adjust to any news.
- Average out – This should not be done according to trade experts. It is a strict no for the investors to average out as they will lose while doing so. When the price of certain stock is falling, people start buying that stock to average out which is not advisable as it’s a losing trade. Experts say that one must wait for the right time.
All these tips are not enough for an investor to start trading in stock market. One must have certain skills to understand the market and its movements. Some technical knowledge would help in avoiding losses and making quick money. Lot of factors influence the market movements so one must be aware of all the things surrounding the market and the stock prices.