Online trading offers various opportunities to gain returns from financial instruments like stocks, commodities, and bonds. Thanks to advanced trading platforms, learning how to start trading has become easier today. With a few clicks, you can trade in these financial instruments and aim to boost your wealth using the right trading approach.
If you are new to online trading, you can refer to this guide and learn about the basics of stock trading. Understand the steps to start trading online in India, the benefits of online trading, how to choose the right stocks, and essential tips on minimising risks while maximising profits.
Stock trading involves buying and selling stocks or shares of companies listed on stock exchanges to profit from price movements. There are primarily two forms of stock trading: day trading and swing trading. Day trading focuses on buying and selling stocks within the same day, aiming to capitalise on short-term price movements. Swing trading involves holding stocks for several days or weeks to benefit from intermediate price changes.
You can follow these simple steps to begin trading online in stock markets:
The first step to successful online trading is education. You can start familiarising yourself with the basics of the stock market. You can try to understand various financial instruments and how to trade in them with different trading strategies. You will be better prepared for online trading once you understand basic concepts like indices, market trends, risk management, economic indicators, and other factors that impact stock prices. Here, we have explained a few of these concepts for your understanding.
- Indices: A measurement of the performance of a group of stocks that represent a particular market or sector.
- Market trends: The general direction in which the stock market or a specific stock is moving over time.
- Risk management: Strategies to minimise potential losses in your trading activities.
- Factors impacting stock prices: Elements such as company performance, news events, and global economic conditions that influence stock prices.
Selecting the right broker is crucial for your online trading journey. Look for a broker that offers a user-friendly online platform, charges competitive fees, and has reliable customer support. It is important to look for a broker who is registered with the stock market regulator in India i.e. the Securities and Exchange Board of India (SEBI). This ensures that the broker operates under regulatory guidelines, providing you with a safer trading environment.
Once you have selected a broker, the next step is to open a demat and trading account. The demat account holds your shares in electronic form, while the trading account facilitates buying and selling. To open these accounts, you need to complete the application process and provide the necessary KYC documents like your PAN card, Aadhaar card, and bank details.
To begin online trading, you must fund your trading account by transferring funds from your bank account. This capital is used to buy and sell stocks. You can start with an amount that you are comfortable with setting aside primarily for trading. While allocating an amount for trading, keep in mind that online trading involves risks, and there are chances of losing money.
With your account funded, you are ready to start online trading. You can begin with small trades to get a fair understanding of the market and the trading platform. While applying the knowledge you may have gained about the stock markets, you must regularly monitor the market trends, analyze stock performance, and make informed decisions.
Let's take a look at the key benefits that you can derive from online trading:
|
Benefit |
Explanation |
|
Convenience |
Online trading only requires you to have an internet connection and a demat/trading account. It allows you to manage your investments seamlessly and respond to market changes quickly. |
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Real-time access |
Online trading platforms allow you to have real-time access to market data during market hours. With this, you can use tools and resources like price charts and news updates to know about the market sentiments and make decisions accordingly. |
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Enhanced control |
With online trading platforms, you have greater control over your investments. You can execute trades quickly, set automated alerts, and efficiently manage your portfolio, all from one convenient location. For example, you can place a trade order and set up alerts to notify you when a stock reaches your desired price. |
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Advanced tools |
These platforms are equipped with a range of tools and resources to enhance your trading experience. For example, if you are trying to trade after market hours, you can use the ‘AMO’ or After Market Order to place orders as per your requirement. Similarly, the GTD (good till date) feature allows you to set orders that remain active until a specified date, giving you flexibility and control over your trading strategy. |
Choosing the right stocks can significantly impact your success in online trading. Here are some approaches that you can use while selecting stocks for online trading.
1. Research and Analysis: Start with thorough research. Go through financial news to understand the price trends of stocks with strong fundamentals. Strong fundamentals mean a company with good and consistent earnings, a positive track record and future growth prospects. You can select a sector or industry of your interest and shortlist a few stocks based on your research.
2. Understand Market Trends: You can look at market trends and sector performance. Look for stocks that are trending upward in a strong sector. These can be good candidates for online trading. You can use technical analysis tools to identify and understand trends and patterns in stock prices. Technical analysis involves studying past market data, mainly price and volume, to predict future price movements of securities such as stocks.
3. Set Criteria: Establish your criteria for selecting stocks. Some of the criteria that you can establish are:
- Market Capitalisation: This is the total value of a company's shares on the market. Larger companies (large-cap) are usually more stable, while smaller companies (small-cap) can offer higher growth potential but come with more risk.
- Dividend Yield: This is the percentage of a company's profits that it pays out as dividends to shareholders.
-Historical Performance: Look at how a stock has performed over the past months or years. Consistent performance can indicate stability and reliability.
You can use one or a combination of these approaches while selecting a stock for online trading.
Online trading is not just about knowing how to pick the right stocks and make profits from trading in them. It is also about understanding the different costs associated with it and managing the risk factors that may come up.
Like stock investments, trading incurs various fees and charges that can reduce your net profits or earnings. Some of these include brokerage fees, Securities Transaction Tax, GST or Goods & Services Tax, SEBI Turnover fees, Exchange fees, and Stamp Duty. Since these costs need to be paid for every trade, you must be mindful of the number of trades you make. Make sure that you account for these costs while planning your trades. Additionally, you have to pay short-term or long-term capital gains tax on the profits generated from trading. The applicability of these taxes depends on the holding period of the asset.
Lastly, remember that online trading involves the risk of losing capital. It is, therefore, important to learn about and use stop-loss orders while engaging in online trading. This way, you can protect your financial standing and limit your losses.
Online trading can be rewarding if you approach it with the right knowledge and strategy. It can offer numerous opportunities for wealth creation and financial independence. To learn about stock trading, you can explore Sharekhan Education. It offers various resources, training and supervised real-time trading for you to develop comfort in online trading.
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