How to Start Trading as a Beginner?

Four Simple Steps to Start Online Trading in India

1.    Choose an online broker 

The first step to start online trading in India is choosing an online broker. Different online brokerage firms offer different services such as stock and commodity trading, margin accounts, futures contracts, etc. The important thing is to research different brokers and choose the one that best suits your needs.

When choosing a broker, factors include fees, customer service, ease of use, security features, and account types available. It is also important to ensure that the broker is trustworthy and reliable. A broker is an intermediary who facilitates all your business transactions and manages your account.

2.    Open demat and trading account 

In the next step you had to open demat and trading accounts. A Demat account is a specialized online bank account that holds shares electronically. This demat account is an intermediary between the stock exchange and the investor. All shares bought or sold are credited or debited from this account.

Similarly, a trading account helps you buy and sell financial instruments. This includes stocks, bonds and commodities on behalf of your clients. These accounts must be opened with approved brokers who are members of stock exchanges like NSE and BSE in India.

You can easily open a trading account and a demat account by submitting the required documents and making an initial deposit. Follow these steps:

●  Collect required documents for KYC (Know Your Customer) verification. This includes your PAN card, address proof and identity proof etc.
●   Submit the application form to your broker online or offline.
●  Make an initial/initial deposit according to the minimum set by your broker.
●  Wait for your demat and trading account approval.

3.    Login to your demat/trading account and add money 

Once you open your demat/trading accounts, you can login using the credentials provided by your broker. To start trading online, you must first deposit funds into your account. This can be done through online banking, internet banking or by depositing into a broker’s bank account. In addition, you must keep in mind that all profits from online trading must be declared for tax purposes.

4.      View stock details and start trading 

The last step is to view the stock details and start trading online. This can be done by simply logging into your demat and trading accounts. You will then be able to effortlessly access live market data, research stocks, view detailed information about companies and their share prices, etc. Once you have identified the stocks you want to trade, you can place buy/sell orders through your broker’s online platform. It is important to regularly monitor and review the performance of your trades.

The goal is to maximize profit while minimizing losses. Once you have finished depositing your money, you are ready to start trading online. Before doing so, it is equally important to understand the markets and develop a strategy that will suit your risk appetite and goals. In addition, traders can use various trading platforms for their transactions that offer features like real-time data streaming, stop-loss orders and margin accounts, etc.

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Benefits of Online Trading

Online trading offers various advantages, from convenience and ease of use to low transaction costs.

●  There are no intermediaries, brokers or agents involved in online trading and investors can access the stock markets 24/7 from the comfort of their home or office.
●  Online trading also eliminates paperwork and makes it easier to buy and sell stocks.
●  In addition, the elimination of commissions charged by brokers reduces the overall cost of investors.
●  In addition, most online brokers offer free educational resources to help you better understand the markets and develop effective strategies.
●  Ultimately, online trading offers a great opportunity to make informed financial decisions. They will also help you diversify your investments while reducing costs.

How to Start Trading Online

In case you are a beginner who wants to start online trading, you should know that it is not as difficult as it may seem. All you need to do is to open a demat and trading account, add money and start trading with the help of the brokers online platform. However, it is important to note that all profits from online trading must be declared/disclosed for tax purposes.

In addition, traders can avail various trading platforms that offer features such as real-time streaming data, stop-loss orders and margin accounts, etc.

How to choose stocks for trading?

In order to trade effectively in the stock market, we can use many methods to analyze a company, from fundamental analysis to technical analysis. Fundamental analysis includes a look at the company’s valuation, important indicators and, above all, the measurement of the company’s internal valuation. If the current market price of a company’s stock is higher than the intrinsic value, then the investor should wait for the price to drop before buying. And if the stock price is currently lower than the intrinsic value, the stock can be bought to take a profit.

10 Day Trading Tips for Beginners

1. Knowledge Is Power

In addition to knowing day trading procedures, day traders need to keep abreast of the latest stock market news and events that affect stocks. This may include Federal Reserve interest rate plans, headline announcements, and other economic, business, and financial news.

So do your homework. Make a wish list of stocks you would like to trade. Stay informed about selected companies, their stocks and general markets. Scan business news and bookmark trusted online news feeds.

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2. Set Aside Funds

Evaluate and commit to the amount of capital you are willing to risk on each trade. Many successful day traders risk less than 1% to 2% of their accounts per trade. If you have a $40,000 trading account and are willing to risk 0.5% of your capital per trade, your maximum loss per trade is $200 (0.5% x $40,000).

Set aside an excess amount of funds that you can trade with and that you are prepared to lose.

3. Set Aside Time

Day trading requires your time and attention. In fact, you will have to give up most of your day. Don’t consider it if you have limited time.

Day trading requires the trader to monitor the markets and identify opportunities that may arise at any time during the trading period. Being informed and moving quickly are key.

4. Start Small

As a beginner, focus on a maximum of one to two stocks per session. Tracking and finding opportunities is easier with multiple stocks. Recently, it has become more and more common to trade fractional shares. This allows you to enter smaller dollar amounts that you want to invest.

This means that if Amazon shares are trading at $3,400, many brokers will now allow you to buy a fractional share for as little as $25, or less than 1% of Amazon’s entire stock.

5. Avoid Penny Stocks

You’re probably looking for deals and low prices, but stay away from pennies. These stocks are often illiquid and the chances of hitting the jackpot with them are often slim.

Many stocks trading for less than $5 per share are delisted from major exchanges and are only tradable over the counter (OTC). Unless you see a real opportunity and do your research, avoid them.

6. Time Those Trades

Many of the orders entered by investors and traders begin to be executed as soon as the markets open in the morning, contributing to price volatility. A seasoned player may be able to recognize patterns on open and time orders to take profit. However, for beginners, it may be better to read the market without any movements for the first 15 to 20 minutes.

Middle hours are usually less volatile. Then the movement begins to accelerate again towards the closing bell. Although spikes offer opportunities, it is safer for beginners to avoid them at first.

7. Cut Losses With Limit Orders

Decide what type of orders you will use to enter and exit trades. Will you use market orders or limit orders? A market order is executed at the best available price at that time without a price guarantee. This is useful when you just want to enter or exit the market and don’t care about filling at a specific price.

A limit order guarantees price, but not execution.1 Limit orders can help you trade with more precision and certainty because you set the price at which your order should be executed. A limit order can reduce your loss on reversals. However, if the market does not reach your price, your order will not be filled and you will retain your position.

More sophisticated and experienced day traders can also use options strategies to hedge their positions.

8. Be Realistic About Profits

A strategy does not always have to be successful to be profitable. Many successful traders may only earn 50% to 60% of their trades. However, they make more on their winners than they lose on their losers. Make sure that the financial risk of each trade is limited to a certain percentage of your account and that entry and exit methods are clearly defined.

9. Stay Cool

There are times when the stock market tests your nerves. As a day trader, you must learn to control greed, hope and fear. Decisions should be based on logic and not emotion.

10. Stick to the Plan

Successful traders have to move fast, but they don’t have to think fast. Why? Because they have developed a business strategy in advance along with the discipline to follow it. It is important to carefully monitor your pattern rather than trying to chase profits. Don’t let your emotions get the better of you and make you abandon your strategy. Keep in mind the mantra of day traders: plan your trade and trade your plan.

Basic Day Trading Techniques

Now that you know some of the intricacies of day trading, let’s take a look at some of the key techniques new traders can use.

Once you master these techniques, develop your own personal trading styles, and determine what your ultimate goals are, you can employ a variety of strategies to help you in your pursuit of profit.

Although some of these techniques have been mentioned above, they are worth revisiting:

• Following the trend: Anyone who follows a trend will buy when prices rise or sell short when they fall. This is on the assumption that prices that have consistently risen or fallen will continue to do so.
• Contrarian investing: This strategy assumes that price growth will reverse and decline. The counterparty buys during a downturn or sells short during an uptrend with the express expectation that the trend will change.
• Scalping: This is a style in which a speculator exploits small price gaps created by bid-ask spreads. This technique usually involves entering and exiting a position quickly – within minutes or even seconds.
• Trading the news: Investors using this strategy will buy when good news is announced or sell short when there is bad news. This can lead to more volatility, which can lead to higher profits or losses.