How Does Stock Trading Work

Introduction

If you want to build a mobile application, you need to code. Similarly, if you’re going to be a successful trader, you need to understand the pulse of stock markets. Stock trading involves buying and selling company shares in the stock market to make a profit from the daily change in prices. It is a short-term strategy to take advantage of price changes compared to investing, which aims to generate wealth in the long term. 

To be able to trade in stocks, you need a trading account. A trading account is an online account used for buying and selling securities in the capital market. If you want to become a stock trader, you need a trading account. 

Who Can Trade in Stocks?

Anyone with an active trading account, market knowledge, and capital can trade stocks. Today, online brokerages have made it incredibly easy to trade from the comfort of your home. All you need is a smartphone or a computer to begin your journey. 

The Types of Trading 

There are two significant types of trading that you need to be aware of:

  • Day Trading

A day trader trades in stocks daily. To profit, a day trader aims to take advantage of intraday price movements – buy and sell stocks at different prices. 

  • Active Trading 

When a trader trades ten or more times a month instead of trading days, it is called active trading. Instead of taking advantage of daily price fluctuations, active traders try to leverage short-term events that impact the price of the stocks to make a profit. 

How to Begin Trading 

If you want to start day trading, these are the steps to follow:

  1. Learn About the Market 

Before opening a trading accountto begin trading, make sure you learn everything there is to learn about the process. Take online tutorials, learn to place a trade, understand a stop loss, and the difference between a market order and a limit order. Remember, knowledge is power in any discipline, and trading is no different. 

  • Open a Trading Account

Next, you need a trading account with a trusted brokerage. Also, having a trading accountdoesn’t mean you need to start trading immediately. You can hold on to the account until you are ready to trade. 

  1. Practice With a Dummy Accoun

Many brokerages offer dummy or virtual accounts where you can mock trade. Thathelps to get a sense of live trading before entering the actual game. It will give you the hands-on experience and confidence to go into actual trading when the time is right. 

  • Allocate Money to Trading 

Every trader needs to have a budget. You can’t trade with all your savings. Set aside a particular sum of money that you can deal with. You should also be willing to part with this money if needed because profits are not guaranteed. So, even if you lose some money, it shouldn’t put a dent in your savings. 

  • Start Trading 

Once you have done enough mock sessions and have a strategy to go about your trading, you can start trading in the real world. Make rational trading decisions and measure your performance from time to time to ensure you are on the right track. 

Conclusion 

Stock trading is not rocket science, but it definitely requires discipline and patience. If you put in enough effort to understand the market and learn different trading techniques, success will be yours. Also, make sure to choose a broker you can rely on when opening a trading account. 

Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.