The most important aspect of trading is that you hold a position for a short period, like a few hours, a day, a few days, or a few weeks.
‘Trading’ is an act of buying and selling shares, commodities, currencies, or any other asset with the intention of making money over a short period of time. The most important aspect of trading is that you hold a position for a short period, like a few hours, a day, a few days, or a few weeks.
If you buy an asset today with the intention of selling it the next year, then it will fall under the category of ‘investing’, and not ‘trading’. In case you are a beginner and you have just opened a trading account, this blog will help you how to go about it. It will explain how to do trading online.
You can trade in shares listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). As we already discussed, trading happens over a short period of time.
Therefore, while trading account meaning in any asset, you need to ensure that it has sufficient liquidity in the market.
Typically, shares of large companies (also known as blue-chip stocks) like Infosys, Wipro, Britannia Industries, Hindustan Unilever, ICICI Bank, HDFC Bank, NTPC, etc. are highly liquid. So, if you are a beginner, you may start trading in the shares of such companies.
You can also trade in commodities like agricultural products, gold, and oil. Bear in mind that trading in agri products like wheat, potato, rice, ginger, etc. is centuries old in India.
Even in older times, people would buy such products from one place and sell them at another place. That said, at all times, traders need to ensure that they buy at a low price and sell at a higher price.
In modern times, trading in commodities has become a lot easier than earlier. With a demat account, you can trade commodities online.
People can also trade in derivatives in India. Under derivatives, they can trade in future and option contracts on commodities, stocks, and indices. A derivative contract derives its value from an underlying asset.
Let us say that the price of a stock X is Rs. 100 today. You have this stock in your portfolio and you want to limit your losses on it.
You suspect that the market will fall in the near term. In that case, you can buy a put option to sell this stock at Rs. 98 in the next six months. Even if the stock crashes to Rs. 50, you will have the right to sell it at Rs. 98.
Now, let us understand how to do trading online or steps for a beginner to take.
The meaning of a trading account is an online account that helps a person trade in stocks, commodities, derivatives, etc. The first thing a beginner has to do is get a trading account opened. For that, it is important to find a trader who offers the right platform, support, and tools to trade.
A trader must learn to analyse the market or the sentiment prevailing in the market. He needs to assess the direction of prices so that he can place his bets. For that, he can use multiple statistical tools like Fibonacci Retracement, Exponential Moving Averages, etc.
It is extremely important to create a trading plan, whether you are a beginner or a seasoned trader. You need to be clear about your objective, strategies, and risk management rules.
Before entering into any position, the first thing you should think about is whether you can bear the losses of that position.
Only if you can bear the losses you should take that position. In other words, traders should think more about the potential downside of their trades than the potential upside.
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