Stock trading is considered an art and science today. It is about learning important strategies, understanding the trading jargon and being able to predict how the market functions, depending on past performances. Despite years of practice, it is not easy to crack this code. But for beginners, trading in the share market could be a challenge. The trick is to remain patient and study how the share market today works.
So, if you are a new investor, here is what you should know before investing in that TCS share price. As a new investor, you need to understand the market basics and jargon, the types of trades done, and the entire process.
Share markets and depositories
In India, share trading happens under two stock exchanges:
- The National Stock Exchange
- The Bombay Stock Exchange
There are also two primary depositories with which all depository participants should register:
- National Securities Depository Ltd
- Central Depository Service Ltd
Types of trading
To invest in the share market, you need to trade. Trading means actively purchasing and selling securities for booking profits. Today, you can do online trading through a broker or an investment company. There are two primary tradings done on the exchanges:
- Intraday Trading: This involves buying and selling shares within a single day. Here, the investor buys shares for earning profits by harnessing the stock movement. The fluctuations in the share prices are harnessed for earning profits. Under Day Trading, investors’ orders are squared off before the end of the trading session.
- Delivery Trading: This involves purchasing sticks and holding them for more than a day and thereby, taking their delivery. You can sell the shares anytime, upon booking a profit. Delivery Trading is considered more secure than Day Trading.
Bull and bear trends
While doing share trading, you should know the bull and bear markets:
- Bull Market: It is an upward market trend. When the economy does well, the market exudes confidence. This is when share trading increases and more companies go public by registering in the stock market. Bull Markets are the phase when the GDP increases, along with employment opportunities, thus, giving investors the confidence to invest in the market.
- Bear Markets: When the stock prices fall consistently, it is called the Bear Market. This is when the economy heads towards a recession phase, thus, creating panic in the market. During this time, investors typically sell off their shares, and cut their losses before the market falls dramatically. People also lose their employment, which further results in lesser share market investments.
Stock Investment process
If you want to invest in HDFC Bank share price, for instance, here are the steps to follow:
- Define your investment strategy and goals along with timelines
- Enter the market when the stock prices are low
- Sell your shares upon booking profits
- Review and monitor your investment portfolio frequently
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