As a participant in stock market investing, you can potentially increase your capital and build your wealth over time. How to start trading and investing in the share market or stock market in India may not seem like rocket science, but you must pay attention to vital aspects of trading and investing before you begin.
Although you can potentially grow your financial portfolio after you open a Demat account and start trading, you should be aware of the possible risks involved in investing in the stock market. Before you start to trade and invest, there are some key steps to follow so you can aim for optimal trading and investing practices.
Steps to Follow Before Starting to Trade in the Share Market in India
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Consider a Broker/Brokerage
Among the first things to do when you wish to know how to start trading in India is to enlist the help of a stockbroker. Individual investors cannot directly deal with the purchase and sale of securities so it is imperative to sign up with a registered stockbroker.
Essentially, your broker is a Depository Participant (DP) who can trade in the stock market on your behalf. All this can be researched online and you can find reputable stock brokers and brokerage firms at the click of your mouse.
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Open a Demat Account
Once you sign up with an authorised stockbroker, you must open a Demat account. This is necessary as a Demat account is a digital storage system that holds your securities (stocks) once they are bought by you.
This account may be linked to another account, a trading account, and this aids you in the buying and selling of shares through your broker.
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Open a Trading Account
A major role in how to start trading is played by a trading account. You must open this account after you open a Demat account. A trading account is linked to your Demat account and this lets you make share market transactions smoothly (buy or sell shares).
For instance, the way this works is that when you wish to sell shares in your Demat account, your linked trading account will conduct the sale of your shares by debiting them from your Demat account. If you wish to buy shares, then your trading account will make purchases of shares and deposit them in your Demat account.
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Link Bank Accounts
To facilitate the smooth transaction of buying and selling of shares, your bank account also has to be linked with your trading and Demat account, so that amounts gained from selling shares may be deposited in your bank account and debits to buy shares may be made seamlessly online.
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Log In to Your Demat Account
Once you have opened a Demat account, you can access your linked accounts as they are all connected. Before you want to start trading, you must log in to your Demat account with your unique user ID or your client name and your secret password.
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Identify Shares/Stock
After you open Demat account, you may want to make profits and go hastily into investment by following the best intraday trading strategy or some other quick tactic. However, investment in shares must never be done in a hurry as you must identify stocks you wish to invest in depending on your financial requirements and goals.
Evaluate your mindset and consider your unique investor profile. You may want to ask yourself whether you are investing for saving for retirement or simply investing as you have surplus cash.
Additionally, you need to decide your time horizon for investment – are you investing for short-term goals or would you like to build your wealth over the longer term? It is important to assess a stock and a particular sector it belongs to. Furthermore, some stocks may be more volatile than others.
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Consider Investment Capital
How to start trading and investing is easy enough, but there are many considerations before you enter the world of share market trading. If you don’t mind the potential losses that may result in trading, then you may be prone to taking risks.
Nonetheless, if you are investing and trading on a budget, you should know how much you can spend in your trading activity, and how much you may potentially lose if your trades go in the negative direction.
Thinking and Trading
Being a participant in the share market may appear exciting, but it is not a game as many investors and traders may believe. It takes careful thought and consideration so that you can potentially maximise profits and mitigate losses.
