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How to trade in the stock market: A guide for beginners

The stock market is a highway that leads you to opportunities for wealth creation. The share market has the potential to give you enormous profits. On the other hand, volatility is a critical part of the share market. As an investor or trader, you may see profits and losses, ups and downs. So, it is important to learn how to trade in share market as beginners.

What is stock trading?

Trading typically means buying and selling shares in the secondary market on the same day. So, it is necessary to get an understanding of the primary and secondary markets.

  • Primary market: A primary market is where companies issue new securities and offer them to the public. So, the transaction happens between issuers and buyers.
  • Secondary market:In the secondary market, you can buy and sell shares that are issued in the primary market. The transaction takes place between seller and buyer. The stock exchange or broker acts as an intermediary in the secondary market.

Read more:How the share market works in India

Now, if you buy and sell a share on the same day, the transaction is called intraday trading. At the end of the day, the trader books either a profit or loss.

Process of stock trading for beginners

The following tips will help you begin your journey in stock trading:

1) Open a demat account:

To enter the share market as a trader or investor, you must open a demat account or brokerage account. Without a demat account you cannot trade in the stock market. The demat account works like a bank account where you hold money to use for trading. The securities you buy are maintained electronically in the demat account.

2) Understand stock quotes:

The price of a stock moves on the basis of any news, fundamentals, technical analysis, and so on. By gaining knowledge about these aspects, you can enhance your knowledge of stocks and stock markets. This will help you to figure out the right price to enter or exit a trade.

3) Bids and asks:

A bid price indicates the maximum price you are willing to pay to buy a stock. The ask price is just the opposite. It represents the minimum price at which the seller is willing to sell the stock. To ensure a profitable trade, it is important to decide on the correct bid and ask price.

Read more: Share market timings

4) Fundamental and technical knowledge of stock:

Study the fundamental and technical analyses of the stock to plan your trading. Fundamental analysis evaluates a security by measuring its intrinsic value. It considers various dynamics including earnings, expenses, assets, and liabilities. Meanwhile, technical analysis evaluates the stock based on the past price and volume chart of the stock to predict future potential.

5) Learn to stop the loss:

Volatility is an implicit characteristic of the share market. So, it is important for a beginner to understand the way of preventing heavy loss. While executing a trade, you need to set a stop loss price to minimise the loss. Failure to put a stop loss may damage your capital heavily.

6) Ask an expert:

The share market is unpredictable. Nobody can predict a stock price accurately. But taking advice from an expert helps beginners make the right trading decision. It guides you to make the right choice.

Read more: Day trading options

7) Start with safer stocks:

A big capital loss in the beginning may bring your confidence down. A wise choice is to start with the less volatile stocks. That may give you a slow start. But those stocks are more likely to sustain a good performance even in adverse conditions.

Share market investments can be tricky. You can take the first step to trading success by opening a demat account. Next, work on developing adequate knowledge of the stock market. This will help you to work against the odds and beat stock market volatility.

Read more: Difference between stock market and share market

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