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A Beginner’s Guide to Online Stock Trading

A Beginner’s Guide to Online Stock Trading

How to Start Trading Stocks in 7 Steps?

Ask people on how to start trading or investing without wasting much time, all they will suggest is online trading.

And what is online trading?

The process to buy or sell shares online.

Is it that simple?

Of course, the process of buying or selling shares online takes merely a minute or two but preparations behind this simple action take more time than your expectations.

Online trading is like an iceberg where you can only see the short process of buying or selling from afar. Only those, who do it, are well aware of the depths.

iceberg

Beginners are always curious to know what’s lay beneath the iceberg, especially when it comes to online trading. But jumping directly to experience the depths of online trading is the biggest mistake one does. You have 90% chances of ending up at the wrong place at the wrong time.

Before you jump in, you have to gain a little knowledge regarding how online trading works so that you choose the right path to start your journey.

This brief guide will give a tour of how online trading works, where to start, and how to go on.

  1. Select a Broker 

Don’t just go on your way to select any broker thinking that you just need to buy or sell. Because brokers don’t come alone. Brokerage charges are always there to empty your pockets. And this is not the only thing to consider. Customer service, tools & platforms, technical indicators, fundamental analysis help, etc., you have to take care of all. So, before you choose any broker, make sure you check and compare everything.

7 Steps to Select a Broker 

  • Decide whether you want to go for a discount broker or full-service broker
  • Gather the list of top brokers (discount or full-service)
  • Compare their brokerage charges and transactions cost
  • Check out tools and platforms they offer
  • Count on the number of indicators they possess for technical analysis
  • Modes of Customer Service like On-chat, call, email, etc.
  • Take a look at reviews and ratings

Once you check out all the above details, you will get a good idea on which broker to go for.

  1. Account Opening 

Once you select a broker, it’s time to open your demat and trading account. Most of all online trading platforms offer online account opening services via form filling. Fill the form, submit necessary proofs, and your account is ready for trade. Brokers may ask you to send physical copies of your proofs via post for security reasons. However, you can fund your demat account and start online trading on the spot, once you open the account – in market hours.

But wait, you just have to open the account. Don’t start buying or selling shares immediately, if you are completely new to the trading world. Read further steps to prepare yourself.

  1. Educate Yourself 

One common mistake every beginner trader makes is funding their demat account as soon as they get access to the online trading platform. And once the account is filled with the cash, traders itch to buy some shares for the sake of trying which cost them a big amount if they are not aware of ins and outs of trading. Don’t go the same way. Keep your demat account aside and start educating yourself about online trading.

Read a few books, watch some videos, read & watch the news, etc. Follow any source you like, just make sure not to take stock recommendations from anyone. This is something you must choose based on your preparations afterward. At least, for two weeks, during the education period, swear not to buy or sell anything.

  1. Prepare Your Watchlist 

Education – check

Trading account – check

Good. Now you are ready to prepare a watchlist of stocks.

During your education period, you must have knowledge regarding how to check stocks, their fundamentals or technicals. If your answer is yes, you are ready to choose some stocks and put them on your watchlist. Online trading platforms offer you to make your stock watchlist so that you can observe them and buy or sell them at the right time.

As this is your beginning, go for the most promising stocks only.

  1. Fund Your Demat Account 

At this stage, you are perfectly ready to fund your demat account and use that money to purchase your shares.

But wait…

There’s a catch.

Don’t go big.

Start small. A little amount to your demat account will be enough to begin.

Buy 2-3 shares of your choice in small amounts to get some experience without losing money. For a while, follow this process to learn the ups and downs of the online trading world.

Note: Stock market education is a non-ending process. Keep learning it more and more through your trading journey.

  1. Select Your Strategies and Stick to them 

During your education period, you will find tons of strategies to try for. And you surely have to try them to see what works and what doesn’t. That’s why I suggested you to start small so that you can go through trials and errors without losing much money. While you are experiencing the market, note down the strategies that work for you and leave the ones that don’t. Plan your strategies and swear to stick by them as you begin to go big.

  1. Risk Management 

Last but not least, learn to manage risk at every step of your trading journey. There are many tools available within your online trading platform for risk management. Before you go big with your trading or investments, you must be aware of what is risk management and how to apply it while trading. It helps you take accurate decisions with confidence where if you go wrong, you can exit at any time without emptying your pockets.

Wrap Up

As you go through your online trading journey, you will learn a lot than just the basics mentioned above. That doesn’t mean you forget the base of online trading as this is like a foundation one should never forget about. Just remember to keep learning, keep implementing, note down what works, and leave out what doesn’t. We will keep you updated with the latest trends. Stay tuned.

Also Read:

How Online Trading Works?

How do I Choose Stock Broker in India?

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