What are stocks?
A stock is also known as equity, which represents a share that represents ownership of a part of a company, which means if you buy shares of a company you are the owner of that part of the company.
Shares are the units of stocks.
The buying and selling of stocks are known as stock trading and this takes place in the stock market.
The is a form of buying and immediately selling a share within a small period instead of holding the share for a longer period, it gets risky to start trading without having proper knowledge about the market.
There is a possibility to face a huge loss of money if one gets into trading without proper knowledge.
Types of stock trading:
Trading is said to be active when the investor places about ten or more trades in a month. They use strategies that rely mostly on the timing of the market. They take advantage of short-term events to gain short-term profits.
They buy and sell stocks of a company on the same day, it does not matter much to them how the business is working, their motive is to just make money within a few minutes, hours, or at most a day or 2.
The people who trade in equity securities are known as stock traders. Their main goal is to buy and sell shares in different companies and try to profit from short-term gains.
These traders play an important role in the market as they provide the needed liquidity.
This liquidity helps both investors and traders also.
Stock traders mainly focus on supply and demand and price patterns, traders usually check the technical analysis to see the movement of stocks and prices.
Way to trade stocks
The first and foremost step to being successful at stock trading is to educate yourself about the market.
Read articles, attend workshops, talk to people who are good with stocks, listen to podcasts and take up courses, and read about the past fluctuations in the market and in the companies you are interested in. Keep upgrading yourself.
The basic hustle is always very important to play the big game.
Always start slow, use simulators followed by putting in small amounts which will not harm your life even if you lose it. After doing this for some time and gaining enough experience and understanding how the market works, start big.
It gets very important to do something fun that has nothing to do with stocks to keep your mind off trading as a stress buster, a stressed mind tends to make mistakes.
Delivery trading is a type of stock trading where the trader buys the stocks and keeps the stocks in their demat account for more than one day. The holding period can be 2 or more days. Delivery trading does not allow the trader to buy and sell on the same day. The main advantage of this method is that it lets the trade get profit from stocks.
Intraday trading allows the trader to buy the stock and sell it on the same day before the market closes. One needs to keep a keen eye on the analytics and track the market position for the entire day and look for the best time to sell the shares to gain maximum profit.
Margin trading is the process of investors borrowing money to buy stocks, it is risky and cash is deposited in brokerage accounts as collateral for a loan.
The main advantage is that margin trading has greater purchasing power.
Margin trading with leverage can magnify the profits and provides more scope for buying on margin. When securities increase in value not only are your securities worth more, their higher value as collateral provides you more leverage for margin trading. It even has a flexible repayment schedule which is not like other loans.
Over here shares are borrowed from the broker and sold in the open market after which the trader waits until the price falls and then buys the stocks back at a lower rate, the difference is the profit.
Buy Today Sell Tomorrow (BTST):
In this type of stock trading the trader buys a stock and sells it the very next day or whenever there is a sense that there would be profit. There need not be a delivery of stocks which saves the depository participant charges.
Sell Today Buy Tomorrow (STBT):
Here, one enters a short selling position, before the closing of the market the securities are sold and the next day the same securities are bought at a lower rate, squaring off the position.
Advantages of trading in stocks:
- Helps in building savings.
- Protects money from inflation and taxes.
- One gets a regular dividend
- Reliable income stream.
- Passive income.
- Has the potential to make you wealthy
- It is risky, there is a possibility you may lose all your money.
- There have been several scams that have come up.
How to protect yourself from stock market scams?
With the increase in awareness of the rewards that the market offers, several predators come in to try and steal money from people. Sometimes it seems impossible to not fall prey to these scammers but it is important to keep yourself safe and save your profits and money from them.
- Do not click on shady links that you get on your email, WhatsApp, or sms.
- Before looking for a course or a workshop, be sure to thoroughly research the course.
Stock trading is a very beneficial way to get passive income and become wealthy, but if one is not careful it can become a way to lose all your money as well. So, it is very important to educate yourself well about the market and trading, and read and understand the analytics properly. It is equally important to protect yourself from the risks and scammers present in the market.