A Guide to Stock Trading for Beginners

by rohit chawla digital marketer

Not everyone who exchanges stock in a while can be termed as a stock trader. It depends on how frequently a person exchanges (sells and buys) stocks. Therefore, we can categorise people pursuing stock business in two core branches; investors and traders.

Stock traders are glued to their computer or mobile all the time, looking for opportunities to make profits throughout the day. On the other hand, investors are in the game for the long run. Investors buy specific intervals and do not sell frequently. They believe in long term gains and growth that comes with holding the stocks.

Stock trading is much more complicated than it looks on any financial news platform or magazine. Stock trading is much more frequent and contains multitudes of aspects. Let us tell you how you can start the stock trading and grow in the market.

Definition of stock trading

Stock traders tend to sell and buy stock each day to profit from the price changes and movements that prevail in the market. These stock traders want to make the best out of the minute to minute changes in the market. They do not want to hold the stock for the year to garner the benefit of fundamentals of the company. Instead, they buy stocks that show better performances for some time.

Stock trading is categorised into two main types:

Day Trading: This kind of stock trading involves trading buying and selling multiple stocks and closing all positions within a day. Day traders do not want to leave their position open overnight to valid ambiguity, additional risks, and charges. Day trading imbibes making profits out of the sheer volatility and fluctuation that prevails in the market.

Active Trading: Active traders are the ones who place at least ten trades each month. They do not have to monitor the market continually but have to devote at least 2 to 3 hours each day to their trading venture. They use strategies based on the market’s timing and garner advantages of the short term happenings and announcements in the stock market.

Comprehensive steps to stock trading

Opening an account with a broker

If you want to pursue stock trading, you must have a brokerage account. One crucial thing to keep in mind is opening the account with a well regulated and authorised broker. It is also exceptionally that you choose a broker that goes with your trading style and compliments your financial goals. Look for the spreads, commissions, swap charges, and more while selecting the broker.

If you are inquiring for a regulated and authorised broker to facilitate stock trading, we recommend ETfinance. ETfinance is a regulated broker functioning in Malaysia, Thailand, Vietnam, and Korea. It deals in a wide range of instruments like forex, stocks, indices, commodities, metals, ETFs, and cryptocurrencies.

Setting a budget and managing risks for stock trading.

If you allocate more than 10 per cent of your capital to individual stocks, you can land yourself in the pool of extreme volatility, and therefore, high risks. There are other rules, too, to manage risk and make a worthy budget. You should only invest the capital or amount that you can afford to lose. Do not invest money that you will need in the coming days or even years.

Use limit and market orders

Once you have a broker, you pursue stock trading with, and have set a budget for your trade; you can use your trading platform to place the limit and market orders in your trades. There is an expansive range of options available for different order types of stocks. There are many varied ranges of orders, but here will discuss the most prominent ones.

Limit order: Buys and sells stocks at a specific price set by the trader. In a buy order, the price set is the price you are willing to pay. In a sell limit order, the price set is the price you are ready to sell.

Market order: Buys and sells the stocks at the best price that prevails in the market at that time.

Practising with a demo account

Most of the online broker platforms offer a free demo account or practise account where a trader can test their strategies, style and tactics. This way, you are already prepared for most of the live market challenges and alterations. You can trade with a demo account without any risk of actually losing and learning.

Setting a benchmark for measuring your trades.

This advice is for all kinds of stock traders and not just the active ones. The main goal of your stock trading is to surpass the benchmark set. Measuring your performance is the key to sound and systematic trading.

Tips for surviving stock trading for beginners

Building trades gradually

If you are a newbie or a new page in stock trading, we would advise you to take it slow, instead of diving deep into the market. Do not open a lot of positions in the starting. Start with smaller and fewer positions. And as you start getting accustomed to the market, you can gradually increase each position’s positions and volume.

Ignoring hot tips and offers

There are many ads and sponsored messages circulating all over the market and internet, promising you high and exact profits. Do not fall for them and incest your hard-earned money just like that. Most of the times, such tips are useless and can lead to high loss and even losses. It would be best to focus on your research before investing your money in any stock or trading position.

Sticking to your trading plan

No matter how long you want to stay in a trade because you think you can make profits, do not abandon your trading plan, stick to it nonetheless. Yes, you might make more profits, but in the big picture, you are harming your trade capital and portfolio. The ones who stock with their trading plan tend to reach the peak of success in the long haul and survive longer in the market too.

Knowledge and research

One of the most important tips is to pursue diligent research before and even after entering the market. You need to know what kind of stocks you want to invest in, how much return they can yield you, and how long you should keep them. You would need to know the market situations and how various stocks will act in multiple market situations for all such nuances. Therefore, you need to be utterly knowledgeable. The research will help you strengthen your knowledge and fundamentals about the market.

Bottom Line

Stock trading is much more complicated than it looks on paper. In practicality, you will have to put in a lot of time researching the market and stocks before you invest capital into them. Do not lose your perspective in the glam of the market. Stay consistent in your trades and strategies.

Do not over trade and keep your emotions out of trading decisions. Feelings of fear and greed often overpower traders and lead to rash trading decisions. It is, therefore, imperative that you think logically and sensibly while making stock trading decisions.