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How to start Trading - The Beginners Guide

How to start trading - the beginners complete guide

There are many things that a beginner need to know before starting stock trading actively or going for long term investment. As I mentioned beginners, so it is a complete guide for those who are beginners in the stock market and don’t know much about it - How it works? What tools they need? How to prepare for it, What to do before trading? What types of trading are? The post covers all basics that needed to start trading.
Here are step by step things that you need to know about.
Learn the Basics
Market is the combinations of many odds and evens for anyone. Many people try their hands daily in it. Some gets odds in their favour some not. Some fails and some sails the wave successfully. The people who fail have one thing common in them that they lack the basic of the market.
Market is a zero-sum game. If one makes money, definitely someone has burnt the money in it. Those who burn their money - they never are given a try to understand the why prices move up and down - I am talking about the beginners if you are a professional then you know the basics pretty well. As a beginner how many of you have chased the hot tips and recommendations of buy and sell, given by so-called experts? Of course many in you are laughing as you did, that proved to be non-sense. Thus, the better way is to learn the basics of the market. 


Establish Your Purpose For Trading

Why do you want to trade? Do you want to turn your money big? Do you want an investment? Are you doing this for your bread and butter? First, find the purpose for it. Purpose will give you magnetism to stay into the market and learn the skills with authority. If you are unable to find the purpose learn it from some pro traders. Learning and copying them will definitely develop you a purpose. Purposeless business fails every now and then and Purposeless trader gives the nose dive.


Purposeless business fails every now and then and Purposeless trader gives the nose dive.

Make your own trading strategy
A majority believes that the share market can be learnt with a crash curse of 2 days. Apart from that watching the Business news channel or reading business newspapers will help them to be rich. Wake up you are are getting into the scam if you are away from basics or you believe that you know the basics so all is done. No, not at all. Basics are the foundation - now your time start to build some beautiful strategy that works for you. Here we have some ready-made strategy - you can use it with a little tweak or as it is by back-testing them.
Find a Broker
A broker provides you with services that allow you to buy shares from sellers and sell shares to the buyers. You need to know there should be a buyer for each seller and vice verse.
You should check the following things in the broker:
1. Low Cost (Their brokerage is low so you can make the profit more.)
2. Reliable (Technically and fundamental. Broker system should give minimum glitches when it comes to trading. You should keep away your money from Karvy like broker.)
3. Honest: It should be honest and don’t steal your money kept in your account.
4. Provides scanners for research
5. Speed and execution: For day trading speed and execution matters. So broker should give enough speed and ease to execute the trades.

There are many brokers you can choose any of them However; I use these two discount brokers’ services that are good and reliable - Zerodha and Fyers.
These two are technically sound and cost-effective.

Do Paper Trading or Virtual Trading
Before putting money into real trading account - of course you need money for trading - buying and selling shares :) - I would suggest, you should do enough paper trading demo trading and develop the required skills. There are many demo trading websites available on the web. You can start demo trading with them at least for 6 months.
Start Small
Once you are done with you demo trading and ready for real trading then you should start small. Start with 1 or 2 quantity of buying and selling of the stocks. As you start getting confidence in your system - slowly you can increase your quantity. Starting small helps you to develop the confidence to come in full-fledged and protect your capital a well.
Now time to know about terminology that you will come across during the trading.
NSE and BSE: These two are Indian stock exchanges from where all type of trading happens and stocks are listed with them are tradable only.
Leverage rate -This is the rate your broker will multiply your deposit by, giving you buying power.
Automated trading – Algo-trading or automated trading is a glorifying word in the trading community. It's basically a computer program that automatically do buy and sell when some certain criteria meets. Program is nothing but an input being processed by a set of rules and output/action taken accordingly.
Initial Public Offering (IPO) – It is an initial offering from a private company when they go for listing. Once they listed they become a public company.
Penny Stocks – The stock which is trading at a very little price like Rs. 10 or below.


Entry points – This is the price at which you enter for a trade.
Exit points – the price at which you exit or close your trade.
Bull/Bullish – If you are a bull you belive market or share will go up and it is bullish in nature.
Bear/Bearish – Bears think price will go down. They are bearish in nature.
Market trends – It is the direction of the market in which it moves. You can learn about trends over here.
Square Off: When a trader closes his position, known as square-off the position.
Beta: A measurement of the relationship between the price of a stock and the movement of the whole market.
Bid: The bid is the amount of money a trader is willing to pay per share for a given stock. 
Index: A benchmark that is used as a reference marker for traders and portfolio managers such as Nifty50, Bank Nifty and Sensex.
Margin: A margin account lets a person borrow money (take out a loan, essentially) from a broker to purchase an investment. 
Nifty: Index of top 50 companies in India
Bank Nifty: Index of 12 public sector banks.
Sensex : Bench Mark Index of BSE.
India VIX: Bench Mark Index for measuring the volatility of the Nifty50.

Terms related to Technical analysis and Indicators

Technical Analysis: It is a process to analyze the behaviour of a share by reading the historical price on the chart.
Indicators: Tools that indicates buy and sell on charts.
Support: Support is a level that share face difficulty to break down or bounce back from that level.
Resistance: Level on price or chart where share face difficult to break out or drop from that level.
Moving Averages – These are the average price of various days like 20 days or 50 days. It also provides buy and sell signal.
Relative Strength Index (RSI) – It is an indicator that provides the strength of a buy or sell.


Moving Average Convergence Divergence (MACD) –  This technical indicator calculates the difference between an instruments two exponential moving averages. Using MACD can offer you straightforward buy and sell trading signals, making it popular amongst beginners.
Bollinger Bands – They measure the ‘high’ and ‘low’ of a price concerning previous trades. They can help with pattern recognition and enable you to arrive at systematic trading decisions.
Stochastics – Stochastic is the point of the current price concerning a price range over time. The method aims to predict when prices are going to turn by comparing the closing price of a security to its price range.
Candlesticks: A candlestick is a type of price chart used that displays the high, low, open, and closing prices of a security for a specific period.

Types of trading
1. Day Trading or Intraday Trading: In this type of trade traders need to square off their position by end of the day.
2. Swing Trading: Traders buy share and keep it for few days to few weeks.
3. Long Terms Trading: This type of trading lasts for a few years to 10 or 20 years or more.

Psychology

One who can master his emotions, he can become a very good trader. You need to have a swift decision while taking an entry or exiting from a trade. Emotion comes before you when you lose or make a profit. No good trader can remain irrational. He have to be rational to avoid trading mistakes. You should train your mind to control your greed and fear.

The Bottom Line

You should start your trading with the good base of learning the financial market. Make a habit to read chart daily and learn price action. You should give the first priority to learning and basis of that, make your own trading strategy. Back-test those trading strategies and gain confidence.

How to start Trading - The Beginners Guide Reviewed by Kumar Chandan on March 20, 2020 Rating: 5

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