Before you trade stocks in India, you must learn how to trade shares.
To trade shares these days, you don’t need to visit the crowded broker’s office anymore. You can buy and sell shares online from the comfort of your home at the click of a mouse. But like all speculative trades, you need to learn the basics of share trading before picking up the strategies and putting them to use. As you have seen how the stock market can behave during crunch time leading to a wide range of economic woes for the average American, it would be better to pick up the ropes slowly.
Basics of share trading can be learnt from several online resources that provide hands-on help and suggestions. But the very basic tactic is to buy low and sell at a higher price when you are satisfied of getting a reasonable return on your investment. You can also go the other way round by short selling at a higher price to buy again when the price dips.
Few great websites to learn how to trade shares are:
Types of share trading
There are two ways to types of stock trading. You can day trade or buy stocks at a lower price and wait for days, weeks or months for them to go up in value when you can sell. Day trading is like hopping on to a running bus and then getting off midway. You can buy any time of the day during a rally that could be an upward or downward trend and then square off during the day. You cannot do it with a host of stocks, but some selected stocks that you can study for some time to get their tendencies and movements.
Once you start studying a stock, you would more or less be able to predict the highs and lows as well as the support prices that they can hold on to during trends. Each stock has support prices at different levels as the price goes up and down. Once the support price breaks, a rally could come up any time and it could take the price of the stock up or down. When you learn about share trading, you would be able to identify the support prices and then take decisions right away. If you can spot trends early, you stand to gain as chances of making profits usually go up when you can strike a deal early.
Put stops to cut losses
Poor decisions can break your bank and your reflexes have to be very quick. You have to think on your feet as the markets could turn volatile. Although chances of making money are much more during volatile trading sessions, you also risk losing a lot of money if you are not careful.
Primarily, the advantage of being able to trade in shares online is that you can program your purchase decisions and let the computer do the rest for you. There is advanced software available that can let you put stops and complete trades when the machine is off as well as when the machine is on. Learning share trading is incomplete if you ignore the importance of putting stop losses when you trade.
It is usually helpful for day trades as the rallies happen quickly and chances of reversals are also common. If the price of a stock is $3.60 early during the day when the trading session begins, you may want to buy if there is an upward trend. You could buy it at the price if you are lucky hoping that it would go up. To prevent your losses from mounting, you could put a stop at $3.55 or $3.50 and let the machine do the rest. If the price falls, you don’t lose more than 0.05 or 0.10 cents per stock as a severe downtrend taking the price to perhaps $3.25.