Beginners Guide: 6 Steps To Process Stock Trading

 

Solely between us, did this thought ever cross your mind that the whole procedure associated with stock investing is super easy?

Specifically, it only implies buying when the price is low and selling when it's at a peak?

Well, there's more than meets the eye!

While investing in the market, there are so many ups and downs that come along with vast hidden opportunities. If a trader has the proper understanding of finding out the lucky chance, then the stock market will eventually become a straight highway for wealth creation.

Let’s master the process of stock trading after having a short overview. 

 

An Overview Of The Stock Market

Stock Market issues stocks for buying and selling publicly in the secondary market. Companies issue their shares with an equity percentage in the stock market to raise capital, and investors invest in the market to earn profit by getting dividends.  

Investing in shares transfers a fraction of the company's ownership to the investors. 

In the market, the IPO is for first-time issued company's stock, and the Secondary market is for further sales of those shares. 

Investors of the stock market are known as stock traders and in order to trade in the market, they require assistance from a third party aka brokerage.

Trading doesn’t only imply matching an order. There are some steps that should be abided to complete the whole trading procedure.

They have to finalize the price and then come to a settlement to complete the trading.

The full process of trading takes 2 days with the order placing day.

For every stock market, there is a Securities and Exchange Commission (SEC) to regulate and control the market and investors. 

In recent times, the Stock Market is completely digitized but before that, it required a fixed place and all the transactions were paper-based. 

Just investing is not the last step for traders, they have to keep track and make their trading decisions to have consistent profit from this market.

In the stock market, traders can have Systematic Investment Plans to trade. 

Besides this, there are so many things to know as a beginner. Here is the process of Starting Stock Trading.
 

The Process of Starting Stock Trading

There are 6 simples steps to start trading in the stock market. The steps are:

Open A Trading Account

The very first step to start trading is finding a broker and opening a trading account or brokerage. The trading account is known as Demat Account.

Trading account holds the investment to trade in the market and also the securities that are bought have been compiled in the account.
 

Understand Stock Quotes

Stock quote is the stock price quoted in decimals on an exchange.

Different news, fundamentals, analysis, and so many things affect the fluctuation of stock prices and that too quite often.

Traders should gain expertise on these fundamental aspects & features.

Financial articles such as CNBC, stock market books, website tutorials are the wealth of information to guide the traders to understand the price quotations.

There are five must-read books for the traders which make the stock quotes to understand. 
 

1. Jack D. Schwager's Stock Market Wizards
 

2. Dr. Alexander Elder's Trading for a Living
 

3. John Murphy's Technical Analysis of the Financial Markets 
 

4. Martin Zweig's Winning on Wall Street
 

5. Justin Mamus's The Nature of Risk

 

 

Bids And Asks

Stock's maximum price that traders are willing to pay is called bid price, and ask price is the minimum selling price that traders are willing to go with to complete the negotiation.

To ensure profitable trading, fixing the appropriate bid and ask price is the most important fact.

Traders show the bid and ask spread as an implied cost of trading. 
 

Fundamental And Technical Knowledge Of Stock

The Fundamental and Technical analysis helps the traders to plan their trading. For fundamental analysis earnings, expenses, assets, and liabilities are reviewed to measure security's intrinsic value.

While technical analysis helps to define opportunity. Stock Traders study the movements of stock price and volume to identify the possibilities.

Traders use different stock charts to recognize trends that suggest a stock's future movement. Both of these analyses are for forecasting and researching stock prices for future trends. 
 

Learn To Stop The Loss

A stop-Loss order is placed for minimizing the risk of losing. If traders don't use Stop-loss orders in a proper way, they might damage their capital.

Traders use different methods to place the stop-loss order. The most common method is a percentage, in that essence placing the stop-loss order at 10% below the purchased price will limit the loss to 10%.

The other ways are moving average method, and day high/low method.
 

Start With Safer Stock

For beginners, choosing safe stock is a vital part. If they face a major loss at the very beginning for not choosing the compatible stock, it will drag down traders' confidence levels. 

It will be wise to choose a much safer stock than focusing on massive earnings at the start. Though none of the stock is 100% safe to trade.

But the relatively safer stock of a company has strong pricing power over its rivals, and people even buy during deep recessions. That can assure traders good performance in the long run.

Related Blog: Beginners Guide: Traders & Trading Styles in The Forex Market.

I hope you understand the full process of stock trading and wish all of you a profitable trading experience in the future. But don’t lose hope, if you are not yet there. Remember It took many years for many successful traders to get to where they are now. And all the BEST!!!