The stock market is one of the traditional markets where traders purchase shares at their convenience and sell it when the market is in a favorable condition. Investments and trades have become two strong pillars of finance, which is a sign of a progressing market.
In this blog, we will discuss the financial aspects that can help beginners crack profitable deals. We will also give a brief introduction to the stock market and its importance in today’s world.
What is the stock market?
Stocks are also known as equities, which are securities that give ownership interest in a public company. Stocks play a real stake in a business and if a trader buys all the shares of the company, they’ll be eligible to participate in the firm’s operations. On different exchange platforms, stock traders can buy and sell stocks based on market favorability and conditions.
This stock market is made up of several exchanges such as the New York Stock Exchange and the NASDAQ. There are two types of stock markets: primary and secondary markets.
Primary Market: It’s the one where companies issue securities to offer to the public. Hence, the transactions take place between the two parties i.e. the issuer and the buyer.
Secondary Market: The secondary market is where you can buy and sell the equities traded in the primary market. The transactions take place between the buyer and the seller. In a secondary market, the stock exchange or broker acts as a mediator. But, when you trade the share, both buying and selling the share within the same day, it is termed as intraday trading.
Process of setting up an account for beginners
Follow the below mentioned instructions to set up your account on a stock trading platform:
- Open a Demat Account: The first step to enter in a stock market is creating a Demat account or brokerage account. It works as a bank account and secures all your holdings under one roof.
- Understand stock quotes: Stock quotes are a challenging job because you need to channel your knowledge through several mediums such as news, technical analysis, fundamentals, and stock market updates. In this way, you can time your entry and exit time in the market.
- Bids and Asks: Bid price refers to the stock price that you are willing to make purchases at. Whereas the asking price or offer price is the one related to the selling of stock.
- Fundamental and technical knowledge of stocks: Trading demands the study of fundamentals and technical aspects. You can plan your day effectively with charts displaying current and past performance. Here, you can measure various intrinsic values based on earnings, expenses, assets, and liabilities. Technical knowledge helps you to compare the past price and the future price.
- Learn to use stop losses: A beginner may take more than a few instances to get a hang of how stock trading works. And they may even face losses until they get used to the process. However, stop loss is a useful tool that assists traders mitigate risks and losses. Stop loss is a term used to place an order with a broker to buy and sell their stock investments once it reaches a certain level.
- Ask an expert: You can always seek the help of an expert or professional who can guide you to trade wisely and at the right time. Experts are the ones who have experienced various market ups and downs and hence accumulate all their resources and knowledge to help you under a consultancy fee.
- Start with safer stocks: As a beginner, you should be aware of the stocks that can provide you with minimal profits and restricted losses. It means you need to look for safer stocks. It will help you boost your confidence and keep you motivated, further helping you keep up with your consistency.
Dos and Don’ts to help beginners navigate the financial market
As you approach stock trading for beginners, here are some points to be followed for a progressive journey:
- Build a diverse portfolio:
A diverse portfolio is the best investment strategy, expanding your interests and scope to a wider ambit. It helps in minimizing risk and maximizing potential returns. It will allow you to explore the stock market by enabling you to invest in various assets, sectors, and market cycles. In this way, you can downgrade the impact of a poor performing stock.
- Invest regularly:
Consistency is the key. Invest regularly to get lucrative results. When you invest regularly by accumulating your funds and channeling it towards different stocks, you can mitigate the risks by moving based on favorable market timings.
- Invest in knowledge:
Before investing in stocks, invest in knowledge. The stock market is a platform that demands intense knowledge to cope with those standards. Before investing you should accumulate knowledge through books, seminars, and online sources to understand the basic concept of finances, investment strategies, and market dynamics.
- Research before investing:
Research is the key to ensuring that you are going on the right path. The more intensive your research, the more effective your results. Don’t invest without planning. Write down the stocks you want to purchase then understand their market value and ideal time to be investing in them. Then prioritize which stock to buy and in what budget. In this way, you gain more clarity and stock trading becomes easier for you.
- Patience and discipline:
The stock market makes you learn patience and discipline because the market is volatile and fluctuations are normal in the market. If you have both of these qualities you can make it but if you do not have these, you should focus on bringing consistency.
Some of the DON’Ts that are important in the process are-
- Don’t buy a stock based on a rumor,
- Don’t give into terms like ‘guarantee’ or ‘returns assured’,
- Don’t invest in haste and use your capital wisely,
- and Don’t invest without a plan
In this article, we discussed several aspects of the stock market, such as understanding the stock market, how to set up an account, and the dos and don’ts for beginners to navigate the financial markets. We are confident that this will give you progressive results and also make your trading journey easy.