The share market is quite a fascinating element in our economy. Whether it is the news or your office, you will hear people discussing its rise and fall. Given that everyone seems to be talking about the share market and its promising profits, you may also feel interested to try your hand at trading in it.
There is only one thing stopping you- your lack of knowledge about the market and its workings. Don’t fret, here is a detailed guide for anyone wondering how to know about share market.
What is the share market?
First things first – let us understand what a share market is.
A share market is a centralised platform where all buyers and sellers come together to trade in different companies’ shares. Traders can trade offline at the physical share market or place their trades online through a trading platform. If you are trading offline, you need to place your trades through a registered broker.
A share market is also called a ‘stock market’. Both terms can be used interchangeably. There are two share markets in India – Bombay Stock Exchange & National Stock Exchange. Only publicly listed companies i.e. companies who held an Initial Public Offering (IPO), have shares that can be traded.
What is trading and investing in the share market?
The salient difference between trading and investing is the duration for which you will hold the shares. If you are trading, you will buy and sell the shares in the short term, while investment means holding on to shares for an extended period of time and liquidating them only in the long term.
Regardless of whether you are trading or investing in the share market, make conscious decisions. Make sure you are putting in money that you can afford to lose, and not betting with your life savings. There are guidelines and strategies that will help you stay focused and optimise your chances of gaining a profit but proceed with caution when trading or investing in the share market.
Now that you understand the basics of the share market are, here are some ways to know how to learn share market.
Open a trading account
A good way to understand how trading works is to open a trading account with a reputed financial firm. If you don’t have a trading account yet, you can easily make a new one. Select the financial firm that you want a trading account with, fill an application along with the required documentation, and once verification is done, you will have an active trading account. In case of online application, the whole process is seamless and paperless, and you can start trading in less than half hour.
The online trading platform and your trading account dashboard will help you understand the different trading options, types of orders you can place, the layout and different elements involved in trading. Depending on the financial firm with which you have your trading account, you will have access to various free tools which help in understanding the market and help you strategize.
Invest in books
You can never go wrong with reading. There are a range of books that cater to the beginner as well as the seasoned trader. Pick a book for a novice and ensure the language used is simple. You do not want to be caught up trying to decipher jargon. Ask your peers for book recommendations or a simple online search will also help you pick the right book for your needs. A book is a treasure trove of information without costing a bomb.
Read relevant articles
There are innumerable articles about the share market written by a plethora of writers. Right from investment stalwarts such as Warren Buffet to a random blogger halfway across the country, there is an article online which gives you information and direction. It is essential to read about the experience of someone as prolific as Mr. Buffet, but it is equally important to read the experiences of other amateur investors. There is a lot you can learn from both. You can set Google alerts for articles published by certain well-known writers in share market or for a particular topic so that you don’t miss out.
Find a study buddy
Learning about the share market can become too challenging. A study buddy can help you stay motivated to pursue the challenge, and vice versa. It also encourages and allows for discussion. You can even split the costs of books and other resources with this friend keeping your investment into learning minimal.
Find a mentor
The world of share market can seem like a labyrinth for the uninitiated. To help you navigate this, you could find a mentor. A mentor could be anyone with experience in the share market- you friend, family member, colleague, professor, or any other person whom you can trust. Ensure that your mentor answers your queries and is available for clarifications. They can provide you with personal insights and anecdotes which can help you to understand the share market differently. A mentor can recommend good learning resources such as books or articles, or help you in identifying potentially good resources. Be wary of individuals claiming to know a lot about the share market without having actual experience in trading. Avoid seeking guidance on online forums and chat rooms as they are almost always sketchy and can land you in trouble.
Follow successful investors
Follow people who have been there, done that. Although the share market is a ‘make mistakes, learn from it’ kind of a setup, you can also learn the tricks of the trade by following successful investors such as Warren Buffet, Howard Marks, and Elon Musk. Whether they give advice in a tweet or write a book about it, learn from every lesson they share. Use your discretion and don’t blindly follow what they advise, though.
Follow the share market
News channels and TV shows are a great source of knowledge on what is happening locally and worldwide. There are many shows with panel discussions on how to invest, what to invest in, and when to invest. Not every TV show will give useful advice, it is good to watch these shows to understand the language of the share market and know who the different players and companies are. Channels like CNBC and Bloomberg are good sources of knowledge. Even if you dedicate 20 minutes every day to listening or reading the news related to the share market and the economy, you will soon have an idea of how the different variables such as oil prices, political stability, foreign investments, performance of other share markets, etc. influence the share market you wish to trade in. Look at past trends and past news articles to know the history of companies and their stock.
You can simply read the headlines each day of leading financial news mediums to understand a little more about the share market. You can discuss the news with your mentor or study buddy to help you gain deeper understanding of what is happening.
Take online courses
If you are serious about understanding the share market, you could invest in an online course or workshops conducted by economists, traders, or investors. These courses will be educational and give you a holistic understanding of how the share market works.
You can attend seminars which focus on one particular aspect of the share market such as ‘how to do intraday trading’ or ‘how to identify safe stocks’.
A word of caution: check the credentials and background of those offering the courses or workshop to ensure that there will be real learning. Read reviews about the speaker, material taught, resources given, the value of the course before committing. One bad experience with an uninformed speaker can make you feel demotivated, so choose carefully.
Buy your first stock
Put your trading account to use, and buy a few shares. It doesn’t have to be many shares or even expensive shares. You can invest a few hundred rupees and still learn a lot about the share market by trading with those shares. This is where you will be able to use your acquired knowledge. Which share to buy? What order to give? When do I sell? When do I buy? These questions will be answered when you trade with real shares.
There are some virtual trading platforms available that you can use. While the whole process remains the same, you do not need real money to buy shares. This keeps you financially safe while also helping you learn more about the share market.
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