The CPI, or Consumer Price Index in India, had hit a year-on-year increase of 7.79% in April 2022, indicating high inflation. Therefore, the value of your savings would have gone down simultaneously as the same savings can now buy less goods. In such a situation, in order to protect your savings, you may need to invest them in high-return financial instruments, such as stocks, so that your overall returns exceed the inflation rate. The following are the steps to take to start trading in share markets.
How To Start Trading in the Share Market?
The following are the key steps to start trading in the share market.
- Choosing Your Broker:
Research and select an online broker that aligns with your trading needs (fees, services, platform).
Prioritise security, reliability, and customer service.
- Demat & Trading Accounts:
Open a Demat account (for electronic shareholding) and a trading account (for buying/selling).
Both are required and linked to a reputable broker registered with NSE or BSE.
- Funding Your Account:
Log in to your accounts and deposit funds using online banking or transfers.
Remember, trading profits are taxable.
- Trading and Monitoring
Access live market data, research stocks, and place orders through your broker’s platform.
Regularly monitor your trades to optimize profits and manage risks.
Requirements to Start Trading
There are some basic requirements to start trading in Indian stock market:
- Open a Demat and Trading account with a trusted Depository Participant or stockbroker platform.
- Link your trading account to your bank account for financial transactions. Add money from your bank account to your broker’s account.
- Analyse your risk tolerance limit, the amount of time and effort that you can put in, etc.
- Decide on a set of trading strategies e.g. intraday or delivery, sectorwise or sizewise preferences.
How To Choose Stocks for Trading?
This information might help to look at certain important checkpoints when choosing stocks to trade:
1. Learn analysis of stocks – This includes learning the plethora of key terms and concepts related to the fundamental and technical analysis of stocks. Fundamental analysis evaluates the stock price by measuring the company’s key performance and other indicators such as earnings, profit margins, assets, etc.
Meanwhile, the technical analysis evaluates the stock based on the past price and trading volume of the stock to predict future potential. Knowing fundamental and technical analysis will help you understand the key stock-related terms and thereby analyse the key features of the stock price or the company fundamentals.
2. Study market trends – It is important that you compare the performances and metrics of the stock with others. That will help you understand not only the consumer but also the presence of competitors in your field.
3. Learn to manage risk – Volatility is an implicit characteristic of the share market. So, a beginner needs to understand the way to prevent heavy losses. While executing a trade, you need to set a stop loss price to minimise the loss. Failure to put a stop to loss may damage your capital heavily.
4. Ask an expert – The share market is unpredictable. Nobody can predict a stock price accurately. However, taking advice from an expert helps beginners make the right trading decision. It guides you to make the right choice.
5. 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.
6. Diversification – Make sure that your portfolio is adequately diversified overall. This will help in reducing the concentration of investments in a handful of companies.
To be an active trading participant for the long-term, learn how to slice up your investments to make sure you are spending in the right segments in a range of investments, including stocks, options, ETFs, mutual funds, IPOs, and precious metals.
Benefits of Trading Stocks
- Potential for high returns: Stocks have the potential to generate higher returns than other asset classes, such as bonds or savings accounts.
- Flexibility: Stocks can be bought and sold quickly and easily, which gives investors a lot of flexibility.
- Ownership: When you buy a stock, you become a part-owner of the company. This gives you a say in how the company is run.
- Liquidity: Stocks are one of the most liquid assets, which means they can be easily converted to cash.
- Diversification: Stocks can help to diversify your investment portfolio, which can reduce your overall risk.
Risks of Stock Trading
- Volatility: Stocks can be volatile, which means their prices can fluctuate wildly. This can lead to losses if you’re not careful.
- Risk of loss: There’s always the risk that you could lose money when you invest in stocks.
- Lack of control: You don’t have any control over how a company is run, which can affect the value of your investment.
- Time commitment: It takes time and effort to research and invest in stocks.
Overall, stock trading can be a great way to grow your wealth, but it’s important to be aware of the risks involved. If you’re considering investing in stocks, it’s important to do your research and understand the risks involved.
How To Open a Demat Account Online With Angel One?
Simply complete the following tasks to open a free demat account with Angel One:
- Go to the Angel One website and click on ‘Open Demat Account’ at the top.
- Enter your name, mobile number and city.
- Enter the KYC details.
- Enter further information, such as bank details, selfie, signature, etc.
- Complete a few more requirements. Once done, your account will be activated.
You can learn more about how to get started on the Angel One app from this article and this blog as well.
Final Words
If you are ready to join the stock market, open a free demat account with Angel One today!
FAQs
How do beginners start trading stocks?
- Educate yourself: Learn about stocks, brokers, and basic analysis.
- Open a brokerage account: Choose a platform that suits your needs.
- Start small: Invest a comfortable amount to practice and gain experience.
How do I start trading on my own?
After opening a brokerage account, research and choose stocks you understand. Place your trades through the platform and monitor your investments.
How much money do you need to start day trading stocks?
While there’s no minimum, day trading can be risky. Start with a significant enough amount to absorb potential losses while learning.
Which trading is best for beginners?
Long-term investing in stable companies is generally considered safer for beginners than day trading, which involves frequent buying and selling.
How to start trading stocks with little money?
Some brokers offer fractional shares, allowing you to invest smaller amounts in pricier stocks. Focus on building knowledge and a long-term strategy.
Is it safe to trade in the share market online?
Online trading can be safe if you use a reputable broker with strong security measures. However, there’s always inherent risk involved in buying and selling shares, so be prepared for potential losses.
What are the 5 types of trading?
There are many trading styles, but some common ones include:
- Day trading: Buying and selling within a single day.
- Swing trading: Holding positions for days or weeks.
- Positional trading: Holding positions for months or years.
- Scalping: Making numerous small, short-term profits.
- Value investing: Buying undervalued stocks for long-term growth.
Can I invest 100 rupees in the share market?
The minimum investment depends on the broker and the stock price. Some brokers offer fractional shares, so you might be able to invest with 100 rupees, but it’s best to check minimums first.
Which trading is best for beginners?
For beginners, long-term investing based on research and a buy-and-hold strategy is generally considered less risky than day trading or other active styles. Focus on building knowledge and understanding risk before diving into complex strategies.
