The CPI, or Consumer Price Index in India, had hit a year-on-year increase of 7.79% in April 2022, indicating high inflation. Therefore, the value of your savings would have gone down simultaneously as the same savings can now buy less goods. In such a situation, in order to protect your savings, you may need to invest them in high-return financial instruments, such as stocks, so that your overall returns exceed the inflation rate. The following are the steps to take to start trading in share markets.
Indian Stock Markets are basically comprised of two stock exchanges to trade in equity shares, futures and options, bonds, debts, mutual funds, and IPOs, i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). All the Depository Participants (DP) are registered with NDSL and CDSL.
In order to start trading, you, as an average retail investor, must have an account with a broker that is registered with the exchange, the depository and the SEBI, i.e., the regulator. That account must have adequate money to pay for the investments and the charges. Once registered, you can then start trading stocks, i.e., buying and selling them.
Requirements to Start Trading
There are some basic requirements to start trading in Indian stock market:
- Open a Demat and Trading account with a trusted Depository Participant or stockbroker platform.
- Link your trading account to your bank account for financial transactions. Add money from your bank account to your broker’s account.
- Analyse your risk tolerance limit, the amount of time and effort that you can put in, etc.
- Decide on a set of trading strategies e.g. intraday or delivery, sectorwise or sizewise preferences.
How To Choose Stocks for Trading?
This information might help to look at certain important checkpoints when choosing stocks to trade:
1. Learn analysis of stocks – This includes learning the plethora of key terms and concepts related to the fundamental and technical analysis of stocks. Fundamental analysis evaluates the stock price by measuring the company’s key performance and other indicators such as earnings, profit margins, assets, etc.
Meanwhile, the technical analysis evaluates the stock based on the past price and trading volume of the stock to predict future potential. Knowing fundamental and technical analysis will help you understand the key stock-related terms and thereby analyse the key features of the stock price or the company fundamentals.
2. Study market trends – It is important that you compare the performances and metrics of the stock with others. That will help you understand not only the consumer but also the presence of competitors in your field.
3. Learn to manage risk – Volatility is an implicit characteristic of the share market. So, a beginner needs to understand the way to prevent heavy losses. While executing a trade, you need to set a stop loss price to minimise the loss. Failure to put a stop to loss may damage your capital heavily.
4. Ask an expert – The share market is unpredictable. Nobody can predict a stock price accurately. However, taking advice from an expert helps beginners make the right trading decision. It guides you to make the right choice.
5. Start with safer stocks – A big capital loss, in the beginning, may bring your confidence down. A wise choice is to start with the less volatile stocks. That may give you a slow start. But those stocks are more likely to sustain a good performance even in adverse conditions.
6. Diversification – Make sure that your portfolio is adequately diversified overall. This will help in reducing the concentration of investments in a handful of companies.
To be an active trading participant for the long-term, learn how to slice up your investments to make sure you are spending in the right segments in a range of investments, including stocks, options, ETFs, mutual funds, IPOs, and precious metals.
Benefits of Trading Stocks
- Potential for high returns: Stocks have the potential to generate higher returns than other asset classes, such as bonds or savings accounts.
- Flexibility: Stocks can be bought and sold quickly and easily, which gives investors a lot of flexibility.
- Ownership: When you buy a stock, you become a part-owner of the company. This gives you a say in how the company is run.
- Liquidity: Stocks are one of the most liquid assets, which means they can be easily converted to cash.
- Diversification: Stocks can help to diversify your investment portfolio, which can reduce your overall risk.
Risks of Stock Trading
- Volatility: Stocks can be volatile, which means their prices can fluctuate wildly. This can lead to losses if you’re not careful.
- Risk of loss: There’s always the risk that you could lose money when you invest in stocks.
- Lack of control: You don’t have any control over how a company is run, which can affect the value of your investment.
- Time commitment: It takes time and effort to research and invest in stocks.
Overall, stock trading can be a great way to grow your wealth, but it’s important to be aware of the risks involved. If you’re considering investing in stocks, it’s important to do your research and understand the risks involved.
How To Open a Trading Account Online With Angel One?
Simply complete the following tasks to open a free demat account with Angel One:
- Go to the Angel One website and click on ‘Open Demat Account’ at the top.
- Enter your name, mobile number and city.
- Enter the KYC details.
- Enter further information, such as bank details, selfie, signature, etc.
- Complete a few more requirements. Once done, your account will be activated.
You can learn more about how to get started on the Angel One app from this article and this blog as well.
Final Words
If you are ready to join the stock market, open a free demat account with Angel One today!
