Learn how to trade the market in 5 steps

For beginners, share market can seem complicated and complex, full of never read terms and confusing charts. To make sure you don't fail in the share market, you should gather knowledge about the basics of the market and learn how to trade.

Mar 17, 2018 07:03 IST India Infoline News Service

Investing in India brings people tremendous opportunities to invest and build their wealth by earning huge profits. Everyone wants to invest in the share market, but they refrain because of lack of knowledge about the market. For beginners, share market can seem complicated and complex, full of never read terms and confusing charts. To make sure you don't fail in the share market, you should gather knowledge about the basics of the market and learn how to trade. 


 
Know yourself
The primary thing you should start with before even thinking about the share market and its complicated theories is to identify sentiments that might influence you while investing. You should consider the following things in order to identify yourself better: 
 
Look at your financial position firmly; it will help you to determine how much you can afford to invest in the market. Keep in mind that you can also lose this money.
 
Identify your long-term financial goals; it will help you to determine how much amount you will need in the future to attain financial freedom. Identify your everyday activities; it will allow you to determine how much time you can give to investing and make investment decisions accordingly.
 
Once you have decided what kind of investor you want to be, you can start your journey. You can start by considering the following five steps:
 
1. Trading account: The first thing you have to do is open a trading account. Every transaction you will do in the share market will require you to have a trading account. You can always consult a good brokerage firm and open a trading account with them. You can ask your broker about anything you want to know regarding the working of a trading account. Try to get familiar with the basics of the account when you have the time. Your broker will provide you with much-needed assistance and will help you to understand how to use the trading account while investing. Meanwhile, here is a basic diagram of how a trading account looks:
 
2. Basic knowledge: Playing the investing game without having a basic understanding of the market can lead to huge amount of losses. You have to create a habit of reading about the stock exchange and its influencing factors. There are books available, which will help you to understand how the market works and how you can avoid losses. You can also ask your broker in case you have doubts. The greater the knowledge, the more successful you will be. Here is a list of few books that you might like reading:
  • The Intelligent Investor by Benjamin Graham
  • Stocks to Riches by Prayag Parikh
  • Everything you wanted to know about stock market investing by CNBC TV
  • Value investing and behavioral finance by Prayag Parikh
  • How to avoid losses and earn consistently in stock market by Prasenjit Paul
 
3. Learn to analyze: You should learn to analyze securities by using both the fundamental method, which requires you look at the financial position of the company, and the technical method, which looks at the past price movements and historical data to predict the future direction of the market. You can read the following books on how to analyze a security:
  • Security Analysis by Benjamin Graham
  • Fundamental analysis for investors by Raghu Palat
  • Guide to technical analysis and candlesticks by Ravi Patel 
4. Trading practice: "Practice makes a man perfect." It doesn't matter how much knowledge you have; you are never too intelligent to practice. Keep on practicing the trading techniques you have learned from the books mentioned above. You can use paper trading, also known as virtual trading to simulate the stock market performance. It will allow you to take hypothetical investment decisions and you can analyze your decisions afterward.
 
5. Other learning methods: Apart from reading books and acquiring knowledge, there are other learning methods such as workshops and seminar which you can attend and gather further knowledge about the share market. This will allow getting more insights into the share market, and you can learn to analyze securities and make better investment decisions. 

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