Mastering the position of a stock trader and learning how to trade stocks can be an exciting and challenging experience. Understanding the basics is essential for novices to navigate the market's intricacies. As a trader or investor, you will experience highs and lows along the way, as well as periods of success and loss. Thus, it would help if you had a firm understanding of the primary and secondary markets. In this course, we will lead you through the fundamentals to help you learn how to trade stocks and get started on this financial journey.
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Learning the basics of how to trade stocks
Primary market
A primary market is where companies issue new securities and offer them to the public. So, the transaction happens between issuers and buyers.
Secondary market
In the secondary market, you can buy and sell shares issued in the primary market. The transaction takes place between the seller and buyer. The stock exchange or broker acts as an intermediary in the secondary market.
If you buy and sell a share on the same day, the transaction is called an intraday trading. At the end of the day, the trader books either a profit or a loss.
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The process of stock trading for beginners
The following tips will help you begin your journey in stock trading.
1. Open a demat account
To enter the share market as a trader or an investor, you must open a demat or a brokerage account. Without a demat account, you cannot trade in the stock market. A demat account works like a bank account where you hold money for trading. The securities you buy are maintained electronically in the demat account.
2. Understand stock quotes
Stock prices move as per demand and supply, economic reports, fundamental factors like company profitability and trader sentiment. By gaining knowledge about these aspects, you can enhance your understanding of stocks and stock markets. This will help you determine the right price to enter or exit a trade.
3. Bids and asks
A bid price is the maximum price you are willing to pay to buy a stock. The ask price is just the opposite. It represents the minimum price at which the seller is willing to sell the stock. To ensure a profitable trade, it is important to decide on the correct bid and ask price.
4. Fundamental and technical knowledge of stock
Study the fundamental and technical analysis of the stock to plan your trading. Fundamental analysis evaluates security by measuring its intrinsic value. It considers various dynamics, including earnings, expenses, assets and liabilities. Technical analysis evaluates the stock based on its past price and volume chart to predict future potential.
5. Learn to stop the loss
Volatility is an implicit characteristic of the share market. So, a beginner needs to understand how to prevent a heavy loss. While executing a trade, you must set a stop loss price to minimise the loss. Failure to put a stop to loss may heavily affect your capital.
6. Ask an expert
The share market is unpredictable. Nobody can predict a stock price accurately. However, taking advice from an expert helps beginners make the right trading decision. It guides you to make the right choice.
