Starting your journey into the world of stock trading can be both exciting and scary at the same time. The stock market offers opportunities to grow our wealth but not without knowledge, strategy, discipline and most importantly patience. The purpose of this blog post is to give beginners a step-by-step guide on how to start trading in the stock market.
- Educate yourself:
Before diving into stock trading, it is important to familiarize yourself with the basic concepts related to this business. You can start by reading books on stock market, watching youtube videos on stock market basics and attending seminars & webinar to strengthen your knowledge base before beginning this journey.
- Define your investment goals:
Most people enter into stock market after being influenced by their friends who “they think” are making a lot of money or by getting some unsolicited tips. This is not the right motivation to start. We must figure out our investment goals. Are you looking to make some short term profits or take to create long term wealth. Are you looking to just park your surplus funds in a productive asset or trying to make it a full time job. Having a clearly defined goal will help you take the suitable path.
- Set a budget:
Atleast in the beginning, set aside a specific amount of money for trading and investing. Then you can start increasing this capital as you start understanding your style of trading/investing. Not having a fixed maximum amount of money for trading can create troubles for new investors/traders.
- Choose a suitable brokerage platform:
Unfortunately in financial markets today, there’s a lot of misinformation and also many unregistered firms trying to attract & cheat uninformed investors. So, it is important to open an account with a reputed broking firm who has a substantial client base. Also, we must consider other things like customer support, broking fees & other charges before selecting a broker.
- Open a trading account:
Once you have chosen a broker, follow their account opening process. This usually means providing proof of identity, address and financial information. Complete the necessary documents and fund your trading account.
- Research and choose stocks:
Setting up your trading account doesn’t mean you have to dive straight into this ocean of stocks. You must make investment decisions only on the basis of sound analysis, reading financial statements of companies, reading business newspapers, watching business news channels, stay updated about the economic events around the globe. You must also consider factors like industry trends, competitive advantage of a company in its industry, quality of management etc.
- Develop a trading/investing strategy:
A well-defined trading strategy is very important to make big money in the stock market. You do not have to know everything or trade on every news to make money. Even if you master one method or create just one strategy on which you have complete control, your trading journey will become very smooth and profitable. Doesn’t matter whether you are into investing or trading, you must define when you will enter and at what condition, you will take exits from a trading/investing opportunity.
- Practice virtual trading:
In sports, it is always better to practice before the real match. In the same way in trading, it is always a good idea to apply your methods and strategies through paper trading or through other virtual trading platforms before putting in your real money into stocks. This way, you can sail through different market situations without having to experience the real risk involved. This will boost both your confidence as well as your skills.
- Start small and learn from experience:
Now, if you wish to take stock market seriously, it will be a good idea to start small and then gradually put in more money, time and effort as and when you start feeling that you are moving in the right direction. In the beginning, track all your trades, their performances, try to mitigate risk and when you become better in doing all this, then start becoming more aggressive in the markets.
- Stay informed and adapt:
The stock market is all about the economy, industries, businesses etc. Thus, everyday, it is constantly evolving. It is important to stay up to date with market news, economic activity etc. Also it is important to review our portfolio timely and to create a strategy that can deal with this dynamic nature of markets. A constant learner attitude is always helpful for a trader/investor.
Initially, beginning your journey in the stock market may require some education, planning, discipline etc. by following these steps religiously, you can sail through this journey from an newbie to a pro-trader/investor and reap the rewards that this business brings along with it.