How to Trade in Stocks Online?
Share trading is one of the key purposes behind opening an online trading account.
But before you start trading online you need to understand some basic things. What
are share trading tips and how to use trading tips intelligently?
What are the nuances of stock market trading and how to trade online with minimal
risks? How to create an online trading account and how to go about buying and selling
shares? These are the questions we will address across 5 key phases.
Identify the Stocks you want to Trade
Once the trading account is opened, the next step is to identify the stocks you
want to trade. You can rely on the research ideas provided by your online broker
for this purpose. Normally, online brokers give trading calls along with stop losses
and profit targets. When you trade stocks online,
you must never do it without a stop loss. Avoid trading based on SMS tips and WhatsApp
tips that you get from unknown sources. There is a science behind trades called
charts and you need to familiarize yourself with the same!
Get Comfortable with Charts
Over a period of time it is always good to get comfortable with charts. You need
not become an expert chartist but learn the basics of how to identify a support
level to buy and a resistance level to sell. Breakouts are very important for trading;so
learn how to identify these breakouts. There are important moving average indicators
and momentum indicators which will help you to cross check for yourself before taking
a trading position on a stock or in the futures.
Fund the Account and Manage the Risk
Once the trade is identified you need to work out the money that you need to commit.
Fund your account accordingly. You can either do a NEFT transfer into the broker’s
account or you can use the broker provided payment gateway for this purpose.
Once the trade is funded and it is executed you need to manage the trade very actively.
How much capital are you willing to lose in a day and how much are you willing to
lose on a trade? These are important considerations that must be built in when you
monitor the risk in your trades.
Focus on Executing Transactions Efficiently
As a trader there must be a lot of focus on executing the transactions in a very
efficient and effective manner. When you are buying in a falling market; use market
orders instead of limit orders. Similarly, when you are selling in a rising market;
use market orders.
The best way to protect from volatility is to place a limit order. If you are taking
a trade just to capitalize on a news item or an announcement then decide whether
you should place a GTD order or an Immediate or Cancel (IOC) order. Executing trades
at an economical cost goes a long way in enhancing your profitability.
Review the Audit Trail of your Trades with a Trading Diary
There is nothing as useful as a serious and rigorous review of all your trades to
understand where you are going right and where you are going wrong. That is where
a trading diary comes in extremely handy. A trading diary is a record of all your
trades with the logic behind each trade. Then you also analyze where the trade faltered
The idea is to locate the basic reason for the success or failure of a trade and
then build that into your trading plan. The trading diary is very crucial for your
success as a trader since it is the place you can be absolutely honest and forthright
about where you went wrong and where you went right in the markets.
How to trade stocks online is a lot more about discipline than about smart strategies.
The best of traders have always focused on managing risk rather than worrying about
returns. That holds an important lesson for you as you embark on your journey as
an online trader.