How to trade on the stock exchange
Many people who aren’t familiar with investments think that trading in the stock exchange is like gambling. While having luck on your side certainly won’t hurt your chances of getting returns, investments are not the gambling at all. Not. And if you want to become a successful trader, you should never rely on fortune.
The market doesn’t exist in a bubble; it responds to day-to-day events, including political news and even festivals. For example, the Muhurat Trading hour that takes place during Diwali is one of the most auspicious times for the Indian stock exchange.
To stand your best chance of getting returns from trading on the stock market, you have to do your research and hone your analytical skills. This article will explain the key steps to trading on the stock market.
1. Do your research
Before you even open a brokerage account, you should learn about the stock market and stock trading. During your research, you’re bound to come across a number of terms you’re not familiar with, but don’t be disheartened. There is a wealth of free literature online to help you learn these essential terms.
If you’re looking for more ways to learn, you can also attend seminars, watch business channels on TV, and listen to business-focused radio.
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2. Choose a broker and a trading platform
Once you’ve researched trading, it’s time to choose a broker and a trading platform.
Brokers are your gateway to the stock market, and you can only access it through them. Various brokers offer different services, but all of them will provide you with a trading platform. Using this piece of software, you can access the market and make trades.
3. Determine your trading strategy
Next, it’s time to decide on your trading strategy. Consider these key points:
- Which sources will you consult when making trading decisions?
- How frequently will you make transactions on the market?
- Which exchange instruments— stocks, bonds, features, etc.—are you interested in trading?
Answering these questions before you start your trading journey will make things go far more smoothly.
4. Trade wisely
When you start trading, make sure you are sensible. There are a few key rules you should keep in mind when you’re trading on the market:
- You should purchase assets when their values decrease and sell them when they increase.
- If your securities start to decline in value by more than 2%-3%, sell them. It might be tempting to wait to see if they start to pick up again, but you will lose funds this way.
- You can set stop signals on your trading program—price limits at which the broker will automatically close your losing position so you can avoid big losses.
- Remember to take frequent breaks so you can keep a cool head.
If you abide by these rules, you should be able to minimize your losses.
5. Pay attention to market patterns
Make sure to pay attention to patterns in the stock market. Prices fluctuate, but there are general trends you can observe throughout the year or even throughout the week:
- Stock prices usually rise from the end of November to the beginning of February.
- Prices grow more quickly during holidays or at the beginning of a month.
- The market tends to move more slowly on a Monday compared to the rest of the week.
6. Be logical
One final piece of advice is to approach trading with a logical mind and to think critically about your decisions. Plan ahead, and if things don’t seem to be going your way make sure that you exercise self-discipline and stick to your plan, rather than getting swept up in emotion.
Trading on the stock market presents a steep learning curve for newcomers. However, if you are sensible, and if you make sure to do your research before starting trading, your stock market journey has a better chance of success.