Millions of people like you want to invest in the stock market but are confused about the whole process of how it is done. This article is a complete guideline for beginners interested in Stock trading.
What is stock trading?
In stock trading, traders buy and sell stocks in terms of price fluctuation of the stock prices. There are two types of traders in the stock market, short-term traders and long-term traders. Short-term traders are also known as Day traders. They take the advantage of minor price change in highly liquid stocks by using high leverage and short-term trading methods. On the other hand, long-term trading is a method of holding a stock for a long time, from a few weeks to years. This is also known as position trading. Since the long-term traders are mainly concerned with the future prospect of the market, they significantly depend on fundamental research.
How do you invest in stock trading?
To start your trading, you’ll need to follow and fill out some steps. We are sorting the steps for you chronologically.
- Open an account
To begin your trading you must have a trading account, a special type of account to hold your investments, known as a brokerage account. You can open a brokerage account with an online broker(website/app) within a few minutes. It may appear to you that selecting the proper brokerage account is a daunting task, but it does not have to be. You should be able to pick the right online stockbroker by choosing what sort of account you want and then comparing different online stockbrokers.
- Set your investment
You must know your limit while you invest in stocks. Don’t exceed your investment limit. Remember, you can only invest the amount of money you’re ready to lose. You should not put your savings into investments; we highly discourage that. But you may put your idle cash into trading investments.
- Learn how to trade stock
Now, as you would have opened your brokerage account and budget in place, we move you forward in trading stock. Go to your online broker trading account you created first, you’ll notice that you’re given several options to choose from, which will determine how your trade is carried out. The most common types are Market order and Limit order.
The term “market order” refers to a purchase or sale of a stock as soon as possible at the best available price. A limit order buys or sells a stock only at or above a certain price that you specify. The maximum price for a purchase order is the highest you’re ready to spend, and the order will only be executed if the stock’s price falls to or below that amount.
Do not fall into emotions while you trade; there will be discussions on overhyped stocks, you mustn’t fall for them straight away, rather justify them. Always do your own research and keep in mind that as an active trader, your duty is to trade the setup in front of you. Remember, there will always be a new stock to invest in.
- Make a risk management plan
While you trade in the stock market, you’ve to keep your eyes open. You must know the ins and out of the market to avoid any probable adversity. New traders are mostly concerned about how they can make money, while they should also consider the risk and situation of losing all their capital. That’s why risk management is important to learn at the very early stage of stock trading.
- Do the demo trading first
What could be better than practice before anything you do to adapt to that task. Likewise in stock trading, you can do the demo trade; the brokers themselves have the option for it and are easily accessible with extra payment or no payment. This helps the traders to judge their trading awareness and ability to face different trading situations.
What are some key features of Stock Trading you must be aware of?
Liquidity
All equities in the stock market are priced according to the supply and demand in free and transparent trading. As a result, it offers liquidity to investors who choose to sell their shares using this active pricing method.
Transparency
Everyone in the stock market has access to the same information. All the transactions that is made in the stock market are transparent and easily accessible for all the participants. Besides efficiency, growth, and freedom, all of these things are achievable because of transparency, which allows all the market participants to see the bid and ask prices of all securities traded on the exchange.
Risk
For investors seeking high returns on their investments, a well-structured and controlled stock market is a route to success. It allows them to access organized, liquid, regulated, and transparent risk investing.
Lastly, Although the stock market might be a market full of bulls and bears, there is also a high possibility for the new traders with proper plan and guidance to succeed.
