Stock Market Basics is the foundation on which your share trading business evolves. Learn and understand the basics to master the art and science of stock trading. There are many number of businesses which you can master, slowly from the comfort of your home, in your free time, which you can take to professional full time trading. Stock trading is one of the best home based business.
If you decide to take up stock trading, then here you get most of the information that you need to know. Make yourself very familiar with all the aspects of share trading basics.
(If you are already walked some distance in stock trading you may skip this page. But reading further may add to your knowledge. If I were you, I rather read and explore every bit from top to bottom.)
What are Stock Market Basics?
Stock Market Basics are:
||Like in any business stock trading has its own technical language. Familiarizing the stock trading terminology, – an important stock market basics – makes it easy for you to understand and converse with other professionals.|
||Any business needs capital. It is the cause and it is the effect.
I never advice you to put in lot of money in the beginning. More money means more risk. Of course once you master the techniques & basics of stock market, then more investment means more returns.
Never borrow. Take a day job, earn, save and invest. Never quit your day job to start trading. You can resign from the present job only when you have proved your efficiency in trading and when you have started earning at least two to three times the present income, consistently for several months.
Start with less of cash investment and more of knowledge investment.
||For the beginners, the trading education starts with simple but rigid money management rules. Just following this one technique meticulously can turn your loosing experience into a profiting experience.|
I would say that the money management is the most important basics of stock market business. Bad money management puts you out of market in no time.
Stock Trading Books
||Get your stock market basics strong by continuously learning. The first place you get your education is from books. Books are always my best friends and remain to be my best companions.|
Buy best stock trading books, read and reread until you understand all the aspects of trading. Follow every steps of great traders & live their experience.
Stock Trading Courses
||The second place to get knowledge is to subscribe to some good stock trading courses. But never spend a fortune on them. Many times reasonably priced courses gives you more value than those which makes you pay through your nose.|
Getting proper education tops stock market basics. You can get good education on stock trading in this website.
||Your computer should have good speed and RAM to run a charting software. They should be reliable.|
Only a small percentage of your capital should be spent on computers.
Stock Trading Software
||Charting is a necessity and a basics of stock market technical analysis. You can get reliable stock trading software for low cost as well as high tech software for high cost.A software costing a few hundred dollars will do fine. You can also get free software, which are good.|
Only a small percentage of your capital should be spent on software. If you are a small investor, you need not spend on charting software. You can become a member of a website which can provide live charts, may be for free or for a small fee.
Types of Trading
||Several different types of stock trading exists including day trading, swing trading, market making, scalping, momentum trading, trading the news, and arbitrage.|
Your trades can be intra day, short term, intermediate or long term. You may go for value investing or contrarian investing.
One method may suit a person but other method may not suit him. Decide on which type of trading suits your time, mind and personality.
||Charting software uses stock market data comprising of open, high, low, close and volume & open interest for a given time period, to create charts. Subscribe to the data for the market you are interested to trade.|
Decide on how long historical data you need. If you are a long term investor you need several years of historical data. If you are a day trader you will be needing real time data with a few months of historical data.
||With out charts no technical analysis can be done. Just like an ECG tells us about the condition of heart, stock charts tells us about the stock market. Chart patterns is the language with which mother market shows us the path to take, which leads us to success.|
Bar charts, Candlestick charts, Line charts are the common charts used for technical analysis. Tape reading or chart reading is the stock market basics with which any trader should be thorough.
||If you are like me, not listening to tips and trade advices, you should make your own stock market analysis. I started my stock trading career by buying shares recommended by my savvy friends and brokers.|
One of my broker had recommended to sell a particular stock to my friend. But he had advised me to buy the same share. He just exchanged the shares between us and pocketed commission from both of us. Those were the days when electronic trading was not yet started and physical shares were being traded.
Stock analysis is one of important stock market basics. It consists of Fundamental Analysis. and Technical Analysis. Do fundamental analysis for long term investment and technical analysis for short term to intra day trading. Just because a share is cheap, it may not be worthy to buy.
Never buy a stock just because it is cheap.
||Indicators in charts shows you the direction of the market, It will indicate us, the probable right time to buy and sell, the right time to book profit and importantly when not to do anything. Experiment with a few indicators, with their different settings. Learn which indicator to use and when to use.|
||Stock Brokers and Stock Exchanges are the link between a buyer and a seller. Without them you cannot trade, unless you are a direct member of the exchange.|
Select a broker who is a member of your selected stock exchange. He should be able to understand you and your types of stock trading orders. Although the stock exchange fixes the maximum limit for the brokerage, it varies from broker to broker though maximum limit is fixed.
Find a broker who charges you least commission with good service (no compromise on service). They may reduce commission further depending on your bargaining capacity and trading volume.
||Dematerializing (Demating) physical share certificates is mandatory. Dematerialisation is the process by which shares in the physical form are canceled and credited in the dematerial form as electronic balances in your demat account.|
Demat accounts are maintained on highly secure systems at the depository. It quickens the share transfer process and protects you from getting fake share certificates.
Open a demat account. Both your broker and your banker will give you demat services acting as the intermediary between you and national demating authority. It is better to open demat account with your broker so that you can save on transfer charges.
||Having analyzed and decided to enter into a trade, you place your order online in your broker’s trading software or offline by dialing or faxing your broker. It may be a limit order or a stop loss order.|
Understanding the different types of orders and their implications, and how to place them is an important stock market basics. You may go long, that is first buying to sell later or go short, that is first selling to buy back later.
Once you place your order you should follow your trades until it is closed.
||Out of 3 Ms (Mind, Method and Money) of successful stock trading, getting your psych in the zone and cultivating good habits, is a very important basics of trading the stock markets.|
Learn one or two systems and strategies. Repeat the trades using them so that you will master them and get habituated to do right things. Be present in the now. Neither in the past – (fear of) failure or success, nor in the future – (greed with) over ambitiousness or anxiety. Harness the power of now.
Dear Friend, every thing is a habit. Good or bad. Any thing you repeat (48 times!) it becomes a habit. Habits are hard to die especially if you keep repeating. So keep repeating successful habits. They become your personality, your second nature. At the same time take care not to repeat unsuccessful habits. Slowly wrong ones die automatically.
Mastering the basics of stock market makes you a pro.
If you think you are a successful trader, yes you are right; if you think you are a looser, yes you are also right.
Getting hold of stock market basics, is the first step of investing for beginners.
And this is not the end of stock market basics!!