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“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.” - Peter Lynch.
There’s a widespread notion that understanding the stock market is as difficult as rocket science. But the quote above sums up why stock trading for beginners in India is not as complex as it seems.
You’ll need to understand the basics of the stock market, to begin with. For example, jargon like EPS, P/E ratio, and others. Then, you’ll have to dive into the core concepts of stock trading that can make your journey easier.
That said, there are still some challenges that you’ll have to overcome. These include avoiding the noise on the internet and investing in stocks that are right for you, not some random Twitter Guru.
Lucky for you, we’ve put together 7 useful stock market trading tips for beginners that can help you start off on the right foot. Let’s begin with the most important tip - finding out if you’re a stock trader or investor.
It’s important to identify if you’re a stock trader or investor as it can help you create a strategy for buying and selling stocks. Moreover, knowing the distinction will determine things like the capital you need to have at hand.
In simple terms, a stock trader looks to make a quick buck (consistently) by buying stocks and selling them in a matter of minutes, hours, or days. Consider this to be a T20 batsman trying to hit a boundary every ball.
It’s a relatively risky strategy and requires you to stay on top of every little detail of the stock you are trading with the help of tools like candlestick charts. Stock trading is also known to require higher capital.
A stock investor is generally in it for the long haul and holds stocks for at least 3 to 5+ years. Consider this to be a test cricket batsman who looks to stay on the crease for multiple days.
Investing is considered to be a relatively less risky strategy of investing in stocks than trading because minor volatility won’t make you sweat. Furthermore, the capital required may be lower as well.
Fun fact: Close to 4% of the Indian population invests in stocks.
You’ll have to learn about the basics of the stock market regardless of whether you want to become a stock trader or investor in India. Simply put, understanding key terminologies and jargon are non-negotiable.
That’s because being uninformed about an asset you’re investing in can open up the door to unwanted tomfoolery. You may be easily swayed by the noise on the internet or others may use your ignorance to fool you.
Furthermore, learning the basics can ensure that you know how to separate a good stock from the bad. For example, you can instantly tell that a company is not earning any money if they have negative EPS.
You’ll want to bookmark this! We’ve simplified stock market jargon and put it all together in place here. Click to read
A stockbroker will give you a platform to buy and sell stocks. But there’s more. Some stockbrokers may charge you every time you trade shares while others may charge a quarterly fee (quarterly settlement).
This is known as a trading fee. If the trading fee is high, it might eat into your profits. That’s why it’s important to evaluate a stockbroker based on parameters like:
1. Investment fees and commissions
2. Safety measures
3. Reviews of existing users
4. Navigation and usability
Once that’s out of the way, you’ll have to move on to understanding certain generic features that most stock trading platforms offer. You can use these to your advantage to avoid loss and maximize your investment experience.
Hey! Did you know that you can buy US stocks like Apple, Amazon, Google, Tesla, and more from India? Tap to know more
You can consult a Cube wealth coach or download the Cube wealth app.
The stop-loss feature is considered to be a very important feature for beginners and seasoned traders. Using it is, in fact, one of the most important stock market trading tips that you can get as a beginner.
A stop-loss is an order that simply tells the stockbroker to sell a stock when it falls below a certain price. This limits or stops the loss that you’d otherwise incur, hence the name stop-loss.
Stockbrokers allow you to borrow money to buy stocks that you can’t afford. They take collateral in the form of shares or cash and charge an interest rate just like a typical loan. This is known as a margin facility.
As you can tell, this is a way to accumulate bad debt that can hurt your future savings and investments. Instead, seasoned investors are known to plan their budget wisely and buy only those stocks that they can afford.
Want to know how to manage your money wisely? Read this blog
Basically, don’t follow the herd. There’s logic to this overused yet useful statement. What works for others may not work for you because your investment goals and risk profile will be different from your neighbour.
That’s why it’s important to choose stocks that work for you and can help you achieve your goals while keeping other factors like affordability in mind.
However, forging your own investment path may not be easy. You’ll have to dedicate a significant amount of time to research if you want to buy the best stocks for your portfolio.
Busy professionals may find this difficult. That's why it’s best to consult experts like Purnartha. They’ve been in the game for 2+ decades and have outperformed Nifty consistently.
Learning engineering takes 4 years, becoming a doctor requires 5+ years of rigour. Similarly, understanding the stock market and identifying the right shares for your portfolio will require time and effort.
That’s why it’s important to learn the trade and start small to limit losses. Experts suggest investing in 1 or 2 high-quality stocks when speaking of important stock trading tips for beginners.
Investors have been known to increase the amount they invest in stocks with time after they’ve developed a good understanding of the market and their own strategies.
You can consult a Cube wealth coach or download the Cube wealth app.
Lastly, there’s no right or wrong age to start investing or trading stocks in India. What matters is to begin as you mean to go because starting early has its benefits. You’ll have time on your side to:
Remember to understand your risk profile and jot down your investment goals by consulting a trained financial professional like a Cube Wealth Coach before investing in stocks.
1. Stock trading do’s for beginners:
2. Stock trading don’ts for beginners:
Here are motivational quotes packed with wisdom and learning from the greatest investors that the world has seen.
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” ― Peter Lynch
“Learn every day, but especially from the experiences of others. it’s cheaper!” ― John Bogle
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” ― Warren Buffett
“Emotions are your worst enemy in the stock market.” ― Don Hays
Bear in mind that engaging in stock market trading comes with inherent risks, and there are no assurances of generating profits. It is imperative to embark on trading with a carefully devised strategy, self-discipline, and a dedication to ongoing learning to enhance your prospects of success within the ever-changing realm of stock market trading.
Ans. Stock market trading can be a fitting choice for individuals possessing the necessary knowledge, risk tolerance, and financial resources. However, it might not be the right option for everyone, particularly those unable to bear the potential loss of their invested capital.
Ans. To get started with stock market trading, you need to open a brokerage account, conduct research, develop a trading plan, and execute your trades through the brokerage platform.
Ans. Risk management is crucial in trading to protect your capital. It involves setting stop-loss orders, diversifying your portfolio, and sizing your positions appropriately.
Ans. A trading plan should outline your goals, risk tolerance, entry and exit strategies, and position sizing. It helps you stay disciplined and focused.
Note:
Facts & figures are true as of 20-10-2021. All information mentioned is for educational purposes and relies on publicly available information. None of the information shared here is to be construed as investment advice. We strongly recommend you consult a Cube Wealth coach before investing your money in any stock, mutual fund. PMS or alternative asset.
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