Home Business Insights & Advice Five handy tips for beginners in stock trading

Five handy tips for beginners in stock trading

by John Saunders
9th Jul 21 11:58 am

The easy accessibility of stock market data has raised awareness among the masses, and everybody’s now looking to put some of their money in the stocks. There are two types of stock trading: one is future trading, where you pay a heavy premium amount for a bundle of sticks and hold it for a long duration, like a month or two. Another one is day trading, where you pay a minimal premium amount to get a bundle of stocks to trade within the market’s working hours.

If you want to earn some money simultaneously with your primary job, futures trading is the most convenient option. However, if you want to become a full-time investor, daily trading and short buying and selling is the way to go. The biggest hurdle when deciding to invest is the involvement of huge risk factors, especially when you are unaware of market intricacies.

Therefore, patience is the key here, and you must try to understand the market first and the functioning of various market derivatives like intraday or call/put, etc. If you are about to embark on the journey of stock trading, read this article to learn about five beginner tips that can come in handy.

Pick a stockbroker

A stockbroker is one who will facilitate the entire trading process. You cannot start trading or invest without registering with a stockbroker first. Now, multiple stockbrokers are available in the market who have their pros and cons. However, there are some determining factors to land a good stockbroker.

Start by comparing the reputation of each stockbroker and trader reviews who work with them. Then comes the brokerage fees, which is crucial because irrespective of your position in the market, you will have to pay this fee on every transaction.    Lastly, every brokerage firm has its website and stock trading apps that provide you with updated charts and investment history to allow back setting while making strategies. Hence, compare the user interface of each of these firms to determine which is the best trading app for beginners UK.

Understand the difference

Trading and investing are completely different from each other, and both have their specifications. An investor is somebody who takes an active interest in a company and puts in huge sums for a long time; we’re talking 5-10 years here. Investors do not bother themselves with the daily market fluctuations and sit patiently till the company starts performing. These companies also pay dividends to their investors yearly, but that’s a small percentage of the total profit that the company makes quarterly.

Daily trading is synonymous with adventure sports. Traders rely on the market’s ups and downs to make their decisions. They buy and sell within a minute and do multiple transactions in a short period. Traders do not read into the companies and their policies; they are strictly limited to chart analysis and movement patterns. Therefore, understand the difference between these two terms and decide beforehand what you want to pursue.

Start with the basics

Nobody learns about the stock market and its functioning in the academic curriculum. Therefore, you have to be self-taught to pursue your interest in the market effectively. Most importantly, do not jump to advanced training methods as soon as you start; it will be like shooting in the dark.

Learn how the market grows, how stocks are listed, the difference between Sensex and Nifty and trade volumes. What are the market’s driving forces, and how to do your research to anticipate future movements? Make notes of your learnings, watch informative channels and observe people who trade live on streaming platforms. You will receive a plethora of information instantly, which can overwhelm you, but you must keep calm and believe in the process.

Don’t forget to put stop loss

Stop-loss is a very handy feature that every stock trading app provides. The Stop-loss feature protects you from heavy losses. The market moves swiftly, and its position changes every minute. Therefore, it is difficult to buy or sell on our desired point. Once the market starts sliding, there is no stopping it, and before you know it, it hits rock bottom. However, if you have put a stop loss at some point, the app will automatically buy/sell your stock at that point. Hence, you must know the minimum loss you can take and place the stop loss accordingly.

Don’t avail margin facility

Margin facility is the lucrative feature offered by several brokerage firms. The margin feature allows you to trade in more than your initial capital. Current laws allow an upward margin of 5X. This means that if you have a capital of 5 lakhs, you will trade in volumes worth 25 lakh.

The catch here is that your profit and loss will be calculated on the upward amount. Therefore, you can either end up making a profit equal to your capital amount or end up losing all your money. If you are a beginner, try to steer clear of the margin facility and venture into it only when you have become seasoned enough.

 

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.

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