In this post, we will get to know about what is stock trading,
stock trading for beginners, and why you should think of seriously investing in stocks.
Previously, investments used to mean depositing money in the bank and earning interest on it. But nowadays with so much information available freely on the internet, people have become more aware of various investment opportunities. They are interested to explore different options to create a secondary income. Many women are also beginning to invest in the stock market.
The stock market holds an added attraction as people feel that it is a quick way to make lots of money. Many have suffered huge losses as they invested without understanding the dynamics of the market. Believing in getting rich quick schemes and having unrealistic expectations will also surely lead to disaster.
There are no shortcuts to building wealth. And the only way to minimize risks is to first understand the basics and learn about how the market works.
Today stock trading is done completely online. It is now easier for anyone to open an account and begin trading.
However, it can be a bit overwhelming at first.
Let’s cover the basics first.
Stock Trading for Beginners
What is the stock market?
It is a place where shares of publicly listed companies are bought and sold. In India, the two main stock markets are the NSE i.e the National Stock Exchange and the BSE i.e the Bombay Stock Exchange.
What is stock trading?
In simple terms, buying and selling of stock/shares of a company through NSE or the BSE is called Stock trading.
There are mainly two types of people who trade in stocks.
Invest for the long term to build wealth. They earn income through dividend payouts.
These traders buy and sell stock many times in a single day for profit. This is known as Intraday trading and should not be attempted by a beginner.
Common Stock market terms for beginners
IPO – Initial Public Offering. IPO means when a Private company goes
public by offering its shares for sale to the
Nifty – National stock exchange 50 or CNX 50. NIFTY 50 stands for National Index Fifty and represents the weighted average of 50 Indian company stocks in 17 sectors
Buy – Purchase shares of a company
Sell – Sell shares of a company
Ask – Price expected for the sale of shares
Bid – The price at which the buyer is willing to
purchase the shares.
Bull market – When the prices of the shares are rising it is
called a bull market
Bear market – When the prices of the shares are falling it is
called a bear market
Liquidity – refers to how easy it is to buy and shares
without affecting its price
Dividend – A sum of money paid by a company to its
shareholders out of its profits
Day trading – buying and selling of shares on the same day
Portfolio – A range of investments held by a person or
An organization consisting of stocks, bonds, etc.
Sector – It is a particular sector of the market for
eg.Banking, Real estate.
ETF – Exchange-traded fund. They are bought and
sold at the market price.
Mutual funds – MFs use money from investors to invest in
diverse assets like stocks, bonds, etc.
Blue-chip stocks – Are stocks of reputed companies having
dependable earnings and regular dividend
Payouts to the shareholders.
For more knowledge you can enroll for beginner level courses related to the stock market.
List of Stock trading courses :
Listed above are just some of the options available. There are also various other blogs and newsletters that you can read to follow the stock market.
Stock Market books for beginners
- The intelligent investor by Benjamin Graham
- The little book that still beats the Market by Joel Greenblatt
- One up on wall street by Peter Lynch
- Market Wizards by Jack D Schwager
- Guide to Indian stock market by Jitendra Gala
- The winning investment habits of Warren Buffet & George Soros
- Everything you wanted to know about stock market investing – Network 18
Don’t like to read, whether online or offline, then watch some amazing youtube videos for stock trading beginners.
List of youtube stock market channels:
Now that you have read and watched everything related to beginning in stocks you must be in a hurry to start. But before you start investing your hard-earned money, it’s best to practice a little bit, isn’t it?
You can practice mock trading at some awesome stock trading simulator sites or virtual trading sites. Simply open an account at any one of the free sites and your account will be credited with virtual money for trading. Since there is no risk involved you can use these sites to practically learn about the stock market without any fear of losing your money.
Best stock trading sites for beginners for mock practice- Virtual (Simulation)sites
It is an educational tool to understand the nuances of trading.
On opening an account you will get Rs. 5,00,000 as virtual cash. You can then start trading in the equities market
In the stock market challenge, you can experiment with buying and selling of shares. You can start with virtual cash of Rs. 1,000,000 to test out your investment strategies.
It is a global platform with data from different stock exchanges. They also provide certificate courses for beginners.
It is an investment simulator where you get to invest Rs. One crore of virtual cash. You can invest in shares, fixed deposits, mutual funds, etc.
Now that you know the basics and have read up on the various online blogs and have practiced on the virtuals platforms it is time to step into the real world of share trading.
You will first have to open a Demat Account.
Open Demat account:
You have the option of opening a Demat account with a bank or with any of the stock brokerage firms.
ICICI, SBI, HDFC, Kotak Mahindra bank are some of the banks offering Demat accounts.
Zerodha, Karvy, Sharekhan are some of the stock brokerage firms.
As always do proper research before finalizing your choice.
Documentation needed to open a Demat account:
- Copy of Identity proof
- Copy of Address Proof
- Copy of Pan card
- Proof of Bank account
- Passport size photos
Though there are usually no account opening charges, there is an annual maintenance charge.
After the verification process is over your account is active. You can then start buying shares and build your portfolio. It is always best if you know someone experienced to help you out in the beginning.
Stock trading is all about patience and discipline. The first rule is to do thorough research about the particular stock before investing. Take your own informed decision and do not blindly follow others’ advice. In the beginning, invest only small amounts. Make it a habit to read up on the latest news and follow the market religiously. As with all good things, it will take time and discipline to get rewards.
Lastly, always keep in mind that higher the risk higher the amount of money to be made but … you can lose all of it too.
So, happy investing. Go make some money.