Demystifying Online Trading: A Beginner’s Guide to Trading from Anywhere

Stock trading in India may sound fancy, but undoubtedly, it involves immense hard work, extensive research, and an understanding of the stock market. So, if you aspire to be someone like Rakesh Jhunjunwala, the road may be bumpy, but you should never give up. Embark on this exciting and fulfilling online trading journey with the below beginner’s guide.

Basics of Online Trading for Beginners

Mastering the act of online trading can be both challenging and rewarding. Here are a few aspects that you must know.

Understanding primary market, secondary market and intraday trading

When the companies (issuers) issue new securities to the public (buyer), the transaction takes place between the issuer and the buyer. This happens in the primary market. On the contrary, when existing securities are bought and sold with the involvement of the stock exchange or the broker, it happens in the secondary market. 

You can either purchase securities and stay invested for a longer duration or sell them within a day at a profit or loss. When a purchase and sale transaction take place within a day, it is called intraday trading. 

Open a Demat account

To start your trading journey, you must first open a Demat account and a trading account with a Depository Participant (DP). Your Demat account is linked with both your bank account and trading account. In simple words, your Demat account holds securities, and the trading account acts as an interface to bury and sell the securities.

Have a decent understanding of fundamental and technical analysis

You may have heard these words often. Typically, fundamental analysis is about studying the financials of the company. There are various ratios that determine the company’s financial situation compared to its peers and past earnings. On the other hand, technical analysis is studying historical data, understanding past trends and patterns, etc. As a beginner, having a decent understanding of both can help you make better decisions.

Develop a trading strategy

Your trading strategy may help you decide what, how much and when to trade. Although you may master various strategies and have a deep understanding after you devote a certain time to trading, your basic beginner strategy may depend on various factors. Your ability to take risks, lifestyle, availability of funds, profit targets, etc., are some of the determinants that must be considered.

Manage risks

You can never completely predict a stock market, and volatility is something that cannot be ignored. So, as a beginner, you must know how to manage risks and prevent losses. One way to reduce your losses is to stop-loss your orders. When a particular security reaches a certain point, you can trigger the stop-loss action to buy or sell the security at that level. For example, if you set a stop-loss security at 20% below your purchase price, it will limit your loss to 20%.

Choose the right trading platform

As a beginner, the most important resource you can rely on is the online trading platform; hence, choose it wisely. Some essential factors you must consider before selecting a trading platform are a user-friendly interface, fees and commissions, a host of knowledge sources and tools, including charting tools, stock screeners, etc. The platform should also offer other investment tools like mutual fund SIP calculators.

Conclusion

The process of online trading can be overwhelming sometimes, but if you are aware of your financial goals, choose the right trading platform, and use advanced tools, you can ensure you limit your risk level and losses.