The Beginners Guide to Stock Market Trading…!!
Stock trading is one of the best to earn additional incomes. It gives an opportunity to be your own boss. With the rise of the internet and technological advancement in the finance industry has lowered the entry points for any person in the trading. Anyone can log in to their trading terminal, with proper internet connecting. Then, they can look at the trades, whether from their home, office, or vacations. But losing money in stock trading is quite often compared to making money, especially if anyone is a new trader. But beginners need the first steps to learn the basics of stock trading and should have access to multiple sources of quality education. But those who learn these basics, they remain with them for a lifetime. Before getting into the details, let’s look at the different types of trading :
- Stock Trading: It involves buying, holding, selling of stocks frequently in an attempt to time the market. The goal of stock traders is to capitalize on short term market events to sell stocks for a profit or buy them at a low price.
- Forex Trading: It is the art of mainly buying, holding, and selling of the currencies in the hopes of making profits on the difference in the value of such currencies. It is a much bigger market compared to stock trading.
- Options Trading: It is a form of derivative trading in which people trade contracts that give them the right to buy or sell an underlying asset at a predetermined price.
- Binary Trading: It is a form of trading in which the traders expect to earn a predetermined payout or nothing at all based on the success of their prediction of the outcome of a specific market event.
Once after getting an understanding of the market, then one needs to choose the kind of assets or securities that you want to trade. Afterward, you will need to decide the right brokerage firm which provides access to all the market. A trader’s choice of brokerage firms directly influences the kind of securities, you will be able to trade, and the kind of trading tools at your services. Apart from that, how much trading and brokerage charges need to pay.
Developing a Trading Strategy
The next step for a beginner trader is to develop a trading strategy. There is a basic difference between a trader actively seeking out market price movement for profit, while an investor typically waits to take a profit from long term movement. The number of trades a trader makes is between tens and hundreds within a week compared to the investor. So, a trader needs to develop a more active strategy in order to make more profit. The first step in creating your trading strategy is to have a proper trading plan and sticking to it until the situation forces you to question your trading strategy. A trading strategy should be based on the help of these models:
1) Mix of fundamental and technical indicator:
A trade should never make a trade based on only indicator i.e. Fundamental and Technical. The mixture of two will help in reducing the trading errors and losses.
2) Trading Charts:
A trading chart will be quite helpful for developing trading strategies. It helps in finding the current trend of the particular stocks or security, whether it’s in uptrend or downtrend, and what will be its movement in the future.
3) Stock Screener:
A Stock Screener is quite helpful in seizing trading opportunities. With the help of the stock screener, one can analyze thousands of stocks in the market to narrow down potential winners before their selective choice. It will help you identify which is likely to be possible top gainers and top losers of the day.
But a trader should avoid making these trading mistakes:
a) Changing trading strategy frequently.
A new trader changes its strategy when the current one doesn’t deliver profit. A trader shouldn’t be quick in changing his trading strategies otherwise one will never learn or master any of the trading strategies.
b) Underestimating the importance of trading or market news:
One of the most common mistakes a new trader makes is not giving due importance to market news which directly impacts their trading. A trading journal will be quite helpful as it makes you update to the market news and events happening in the future, which may affect your trades.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing