Do numbers excite you? Do you wish to enter the dynamic and extremely lucrative world of stock trading? But getting into the world of trading can be confusing and most of the time, the risk involved in it can make you change your mind about pursuing it. We bring to you this step by step guide to help you become a stock trader.
But don’t worry, this article will tell you everything there is to know about stock trading and making a career in it whether you are looking to work as an individual or represent a firm.
Who is a stock trader?
When put into simple words, a stock trader is a financial investor. There are mainly two types of traders: individual traders also called retail traders and professional traders who buy and sell stocks on behalf of a financial company or firm.
Despite who he/she works for, a stock trader’s primary objective is to buy and sell shares in different companies with a focus on making profits from the fluctuations in the market. They either work with a stockbroker or with a brokerage firm and get access to the shares that they trade.
Different types of stock trading
To better understand the world of trading and to create a successful trading career for yourself, you will need to know about the different types of trading. There are four major types of trading: Intraday trading, Swing trading, positional trading, and Scalping.
- Intraday Trading: Done by day traders, Intraday trading involves buying and selling of stocks on the same day. A day trader registers profits and losses in a quick fashion before the stock market closes for the day. They do not hold any equities for more than a few hours and start fresh every morning when the market opens.
- Swing Trading: Swing trading can be called as the extended version of day trading. Swing traders hold equities for a day and predict the short-term fluctuations in the market overnight.
- Positional Trading: Positional trading calls for holding stocks for a long time. The stretch can be a few months to even a few years. Traders in this type predict large profits and big price movements over a long period of time. Minor fluctuations are mostly ignored and the traders make decisions by analyzing both technicals and fundamentals in the long run.
- Scalping: This type of trading is one of the quickest ones and involves making a profit off small price changes, usually after a trade is made and has become profitable. Anybody using this type of trading needs to follow a strict exit strategy as one big loss can make up for all the small profits that got stacked over many trades. Scalpers hold equities for a few seconds or minutes and trade with the slightest of movements, resulting in the lowest risk possible.
Becoming a Stock Trader in India
Now that you know the basics of the trading world, becoming a successful one just became a bit easier. Firstly, just like specializing in any other field, trading also requires passion and a lot of hard work. Becoming a trader requires an investment of time as well as money and requires research and understanding of the market.
But before we get into becoming a trader, you should know that a trader that has acquired experience, understanding, and skills can make about INR 1 lakh per day with having an investment of INR 1 crore.
Now that you know the potential of being a trader, let’s dive into the steps of becoming one.
Step 1 : Learn the Technicals
The first step to take in any career is to start by building a set of foundational skills. Trading is no different. Even though you don’t require a degree to become a stock trader, enrolling in some quick courses can be a good place to start. These usually don’t last more than a few weekends and teach you a lot of tips and techniques.
Here are the places you should take a look at:
- MyCaptain
- Institute of Career In Financial Market (ICFM)
- BSE Training Institute India
- National Institute of Securities Markets (NISM)
- Nifty Trading Academy
- Stock Market Institute
- NCFM Academy
- Safe Academy
- Datta’s Institute for Stock Market Solutions
- RMJ Institute of Capital Market
- J.D.C. Bytco
Step 2. Pick your style
Once you are done with building a foundational knowledge on the subject and are now comfortable with your technical skills, you should pick the type of trader you will become. Don’t take too long in deciding this as there’s always an option of changing your style if you wish to. But do not skip this step either as it is important to know which direction you are headed towards.
The more you dive into the trading world, the more you will start to realize where your speciality lies and evolve your style accordingly. For now, pick the one that you think you will be most comfortable with.
Step 3. Write down the basic rules
This step involves making a basic strategy which you will be following closely. This is important to help you make decisions without wasting too much time. Ensure this outline includes money management, and risk management rules.
Once you have built a basic strategy, gather the Intraday historical data for as long as you can and start testing your strategy. Testing how your strategy would perform if you were making a trade back in the day will help you understand the mistakes in it and modify it. Make this an iterative process until you are confident that your strategy is ready to take on the real trading world.
Step 4. Start trading and become better
If you are aiming at working for a financial firm or company, the best place is to start looking for jobs both offline and online. But if your goal is to become an individual trader/ investor, its time for you to accumulate capital and start investing according to your strategy and style.
You need to understand that you will be making a lot of mistakes, it could be with your strategy or by picking the wrong style or by investing more than you should have or any other reason. The important thing is to learn from those mistakes and make sure that you don’t make them again.
Read more books, learn more, wait and observe if you feel like it and soon enough you will get on a roll. As mentioned earlier, trading involves a lot of hard work and is an ever-changing world. So be open to changing with it.
Tips for Beginners in Stock Trading
We bring you a few tips and tricks to help you get started with Stock Markets.
- Always Do Your Own Research : There are endless sources from where you can get information to help you make an informed decision about which stock to invest in. While these resources are quite handy, you also need to do your own research and identify the strategies that will work for you as stock trader.
- Set up an Investment Account : You need to set up an account to be able to make transactions. One option that you have, is that you can set up a brokerage account to buy and sell stocks, in exchange for a commission fee. There are different kinds of service providers, one is such who will help you hands-on by suggesting you stocks based on your financial situations. Another type of service providers are those will provide you little advice but would help you make the necessary transactions. You need to identify what would work the best for you.
- Don't Invest What You Can't Afford to Lose : This one is a no-brainer. Whenever you are making an investment, there is a chance you may end up losing that money. So when you are just starting out, don't invest money which you would otherwise use for your basic living expenses just in hopes to make excess money. Always set up your cushion of savings first and then you can invest the remainder amount or a part of it in stocks.
- Start with Low-risk stocks : Start with buying and selling stocks which are less risky. This will help you understand how the market actually works. As a beginner you can consider investing in shares of utility companies, as their growth is gradual and consistent.
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