A stock market is a place where you can get great investment opportunities that can help you reap remarkable returns on your capital. But not all is rosy here. The risk factor attached with online stock trading is something that no trader can avoid. It is a path that one needs to tread on with caution. Online stock trading for beginners can be quite easy if you are clear about a few things and your goals.
Here are a 5 basic things you must be clear about for trading in the stock market.
1️⃣ What kind of investor do you want to be?
The foremost aspect you need to decide on is whether you want to enter the stock market as a long-term investor or a short-term investor. Long term investors look at the stock market as a place where they can park their surplus money for a longer time, and they stay invested in the financial product they choose for at least a year. The short term investors create portfolios and then keep churning their investments. They do not hold on to any investment for long and square off positions within one financial year.
2️⃣ Difference between long term and short term investments
Besides the holding time mentioned above, another difference can be understood regarding the involvement and time required to track the market. Short term investors have to devote more time monitoring the market to identify the right entry and exit points for a trade. On the other hand, long-term investors must keep patience and ignore minor fluctuations to reap lucrative returns. Learn the exact difference between value investing and intraday trading to understand perspectives of generating profit in the share market.
3️⃣ No one can escape the volatility in the stock market
One thing that every beginner must be well versed with is that the stock market is subject to volatilities. A trader may be entering the market at its peak boom time and could get good returns in no time. On the other hand, a bearish trend can also last for a while in the stock market, which can be a testing time for investors. Patience is a virtue that all traders have to learn to exercise in the stock market. Here is how you can benefit from market volatility and fluctuations in Sensex & Nifty.
4️⃣ Opening Demat account with the right broker
Whichever online trading platform you choose to open demat account with, you must check brokerage charges, AMC and platform fees, technology used and customer support. In addition, check whether the platform you have chosen provides fundamental and technical analysis, trends and patterns of stocks can help understand the range of movement and resistance levels related to the stock. These are helpful while making buy and sell calls on your stock.
5️⃣ Learn the art of controlling losses and booking profits
Many investors make the mistake of waiting for the extreme high and low prices of the stock to book their profits or losses. Having a set growth percentage in mind and booking profits once the same is reached is a wiser move, as it’s difficult to predict the peak prices of the stocks. In case of losses, the investor needs to identify if it’s a temporary decline due to consolidation or there are fundamental reasons for a dip. It can help control losses by taking a timely call on exiting from a stock.
📌 You can also read:
- 5 Investment Tips for Newcomers in the Stock Market
- Top 5 Essential Skills to Become a Successful Trader
- Are ETFs Good For Beginners? Guide to Invest in ETFs in India
Happy Trading 📈