During the coronavirus epidemic, when unemployment destroyed the job market, many people looked to the stock market to supplement their income or make up for lost revenue. You need some fundamental information to make a stock market investment. Since almost all stock market transactions are completed online, you must also be registered with a licensed online broker. In this manual, we cover the fundamentals of the stock market and provide you all the tools you need to begin trading stocks.
Why do individuals make stock market investments?
To hold stock shares
Anyone will become a shareholder of a firm if you purchase stock from one of its publicly traded companies. Because a stock is an equity that indicates investor proportionate ownership in the firm, it implies that you will share ownership of that business.
When you finish a successful deal and when individuals receive dividends in the shape of cash or stocks are the two methods to benefit from stocks.
To acquire financial knowledge
The stock market will educate everyone how to manage their finances independently. Your financial knowledge will grow as you make investments and participate in trading for several months.
What is the stock market trading process?
Let’s now discuss what exactly we do when we start trading.
Get trading account
The first step is to open a trading account along with a demat account. You will be placing your orders from the trading account and storing the securities in demat account.
Place your Bids
The next step is logging into the trading account and placing orders. When you want to invest in a particular stock, place your bid. Specify the number of shares you want to purchase and make the due payment. Buying stocks can be done with two different strategies.
Buy stocks (Long Position)
When we think a company’s stock price will rise, we either buy shares or open a long position. When there is a positive trend or when they believe the price will rise, many traders purchase shares.
Trade shares (Short Position)
When we think the stock price of a corporation will decline, we sell shares or start a short position. When we feel a negative trend will occur or when we believe the stock price will decline, we take this action.
Set A Price Goal
Another thing traders can do is to set a specific price target for a stock. Any trade position will be immediately closed when a Target Price (TP) is set. This implies that whenever the stock reaches your target price, your profit will be locked in. Setting a TP is really practical and wise.
Factors Influencing Stock Market Movement
The fluctuation of stocks is influenced by a variety of variables, including business results, analyst target prices, market trends, stock market news, international forces, the state of the economy, and unforeseen occurrences like pandemic risks.
Money is the second item you need before making stock market investments and trading. Your money serves as the capital that you will increase via trading. Be careful to only invest money that you can afford to lose. That implies that it is entirely OK for you to lose that money due to risks. Your objective, risk or no risk, is to increase your MONEY.
A solid approach is essential for successful investing. Your investment goal will serve as the foundation for your plan. A solid technique for long-term investing is to consistently purchase shares of high-quality stocks or blue-chip firms. Dollar-cost averaging is another well-tested, successful method for novices who wish to invest for the long run.
How to Make Money From Stocks
The share price will change when you purchase shares from a firm since it is based on both company development and market sentiment. If a company’s earnings increase over time, eventually its share price will as well.
Companies have the option of choosing to distribute dividends to their shareholders in order to share the earnings they make from their operations. The dividend is typically paid out one to four times each year.
How to Assess Stocks
By examining a firm’s quantitative factors, it is possible to evaluate a stock using the financial data of the company. When choosing a company, we often take into account factors like revenues, profits, price to earnings ratio, return on equity, free cash flow, and dividends.
Understanding Financial Reports
Annual Report: a synopsis of the quarterly financial statements, which are issued once every three months. The cash flow statement, balance sheet, and income statement are all included. Additional data is shared, including a breakdown of borrowings, discussion on prospects, and the company’s regional revenue.
Yearly Report: It contains more detailed company information than quarterly reports, including the CEO spotlight, general corporate information, and management’s comments. It contains a summary of all financial accounts, similar to a quarterly report, but with additional information and graphics showing comparisons over several years. Information is also provided on the company’s future plans for doing business.
Get a stock trading app and begin your Journey
Now that you know quite a few things about the stock market, you can enter it without much hesitation. These days many brokerage houses provide a stock trading app to begin trading instantly. Kotak Securities is one such well-known firm where you can open demat and trading accounts in minutes. The process is completely online. Moreover, the app comes with unique features and benefits assisting you to trade effectively.