The increase in availability of technology, access to the internet and the creation of online trading platforms has made the stock market and trading options available to all. Stock trading, if done properly, involves a lot of profit to be made through riding the ups and downs of the market. Online trading, in its most basic definition is merely the sale and purchase of various securities ranging from equities to bonds through an online trading platform.
How to Start
To start your journey in online stock trading, the following four steps are generally followed:
- Opening a Demat Account and a Trading Account:
This is important because you require a demat account in order to keep all your investments in shares and various financial instruments together and in an electronic format that can facilitate easy trading. While doing so, make sure that the account is opened with a stock broker who is certified with SEBI and is registered with all the exchanges.
- Research and Learn the Basics
It helps to know about the share investment market in detail since the basic tenet on which a stock market functions is the demand and supply that exists. To become a better investor, it is useful to keep abreast of the latest financial news and invest in a few courses as well.
- Practise with a Simulator
Since the losses and gains made on a simulator will not actually affect you, it makes sense to gain experience on the simulator rather than to invest your actual money and try learning the ropes on the actual stock market.
- Plan and Strategize
Before investing in a certain stock, always make sure that you have limits set on both the amount of money you will spend on that particular stock as well as the loss you are willing to bear.
The Types of Trade
There are various types of trades that you can choose to make in the market. These number 12 in total and may include various ones you have not yet heard about. Before choosing to trade with any of them, make sure that you go research and study the risks and strategies involved in trading with that particular type. Some of the common trades made are market trade, limit trade, day orders, stop loss, good-till-canceled trades, bracket trades and trailing stops. While these terms sound intimidating and rather complicated, they in fact outline very simple processes that can greatly help in becoming a more efficient investor. You just need to put in a little work into understanding the processes properly. Learning the terms and lingo will also help in communicating more efficiently with your broker.
It has to be mentioned, however, that this is more applicable in the case of long-term investments and not in the context of short-term or day trading. No stock trading should be executed without first understanding completely the consequences and exactly what you are doing and taking some advice from a professional. There are various online facilities available to learn more about the market – make sure that you take advantage of the resources available.