If you are interested in the stock market, you must have wondered how to learn online trading. Whether you are a student, have a job, or are a homemaker, you can earn lakhs per month by knowing “how to do online trading”.
In this blog, you will deeply understand what online trading is, how to do online trading, the benefits of online trading, and some essential tips for starting online trading.
What is Online Trading?
In today’s modern society, the question of what online trading is is very common. Online trading is buying and selling shares, mutual funds, and other financial products through the internet. In this, you can learn how to do online trading by buying and selling shares, mutual funds, gold, commodities using a broker’s website or application from a computer, laptop, or mobile phone.
How to Do Online Trading: Types of Online Trading
Intraday Trading: To understand what online trading is, it is essential to know about intraday trading. If you buy a share on the same day and square off your position by selling it before the market closes on the same day, that is intraday trading.
In intraday trading, your broker gives you 5 times margin, which means you can trade up to ₹50,000 with ₹10,000, provided you have to square off your position on the same day.
Swing Trading: In this, you hold a share, gold, or commodity for 1 week to 1 month. In this, you can buy shares, gold, or commodities at a low price and earn profit by selling them when the price increases.
Position Trading: In position trading, you hold a share, gold, or commodity for a few months to a year to earn profit.
Option Trading: In this, instead of buying a share, gold, or commodity, you buy the right to buy a share, gold, or commodity for a specific period in the form of an option or future contract. This involves a lot of risk and is not at all for beginners.
Intraday trading, swing trading, position trading, options trading can be understood well to know what online trading is.
Essential Tools for Online Trading
Online Trading Platform
For online trading, you need an excellent platform where your order is executed immediately, and there are no technical issues in the platform.
Charts
To view trading charts, you can use Tradingview or investing.com, where you can see the live chart of any listed stock or commodity. The most used tool for viewing charts is Tradingview, where you can analyze using trading indicators on live charts.
Technical Indicators
Technical indicators are a trading tool for technical analysis. Using this, you can find out the market trend, volume, support resistance.
Some of the most used 3 trading indicators are:
Volume: This tells how many shares were bought or sold in a particular time.
RSI: This is a number between 0 and 100 that tells how much a share is “overbought” or “oversold”.
Moving Average: This is a line used to find out the average price of the last few days. If the price is below this line, it means the price is less than its average, and if the price is above the line, it means the price is above its average.
How to Start Online Trading
1.Choose an Online Broker
First, you will have to choose a SEBI registered broker. You can only trade through a broker, and the broker also provides you with an online trading platform and facility to view charts. Choosing a good broker becomes very important because choosing the wrong broker and not knowing “how to open a demat account” can lead to losses in your demat account. While choosing a good broker, pay special attention to demat account fees, trading platform, and customer service.
Some popular brokers in India:
- Zerodha
- Upstox
- Angel One
- 5paisa
- Dhan
- Kotak Securities
- mStock
2.How to Open a Demat Account
After selecting the right broker and knowing “how to open a demat account”, you have to open your demat and trading account. To open your account with the broker, you will have to submit some documents like Aadhar card, PAN card, bank account details and complete the online KYC process.
3.Learn About Trading
Get information about the basics of trading, which includes using a demat account, how to take a trade, what is the stock market, doing technical analysis, risk management, and trading strategies.
4.Make a Trading Plan
After learning about trading basics, make a trading plan for yourself, which will include how many trades you will take in a day, which strategy you will use, and what percentage of your capital you will risk in a day.
5.Analyze Stocks and Start Trading
After making a trading plan for yourself, you can start online trading with less money. Before trading in any stock, be sure to analyze it thoroughly.
Disadvantages of Demat Account
Along with knowing how to open a demat account, it is also important to know about the disadvantages of a demat account.
Demat Account Fees: There are fees for opening and maintaining a demat account.
Brokerage Fees: Demat account holders have to pay annual maintenance fees. These fees apply to the trader even if there is only one share in the demat account.
Demat account often makes trading very attractive. New investors are often influenced by the advice of their friends and relatives when making investment decisions. Because trading has now become simple, some investors don’t think much before buying or selling assets. They have to bear the losses of the demat account later.
Transacting with electronic instruments may seem somewhat difficult and complex for new people in the world of online trading.
Other Fees: Brokers charge additional fees such as DP charges, transaction fees, etc.
Common Mistakes and How to Avoid Them
After knowing “how to do online trading”, new people make a lot of mistakes in the stock market. By avoiding these mistakes, you can be successful in trading. After knowing “how to do online trading”, some traders make mistakes in the beginning. Below are some main mistakes that you should avoid:
Trading Without a Plan
Many new people start trading in the market without any trading plan after knowing “what is the stock market”, which results in them suffering a huge loss. Before starting trading, you should have a trading plan which can help you avoid big losses in the beginning.
Not Analyzing the Market Correctly
Not analyzing the market correctly is also a reason for beginners to make losses in the stock market. If you know “what is the stock market” and are starting in the stock market, it is very important to analyze the market correctly using technical analysis for online trading.
Making Frequent Changes in Portfolio
If you are doing swing trading or position trading, you should not make frequent changes in your portfolio before time. This not only reduces your profit but also makes you pay more brokerage.
Not Understanding the Risk to Reward Ratio
Risk to Reward Ratio means how much profit you are taking in return for the risk you are taking in a trade.
If you buy a share for ₹10,000 and you take a risk of ₹200 in that share, meaning if the share price comes to ₹9,800, you will sell the share at a loss, and if the share price becomes ₹10,400, you sell the share with a profit of ₹400, then your risk to reward ratio is 1:2.
Not understanding the risk to reward ratio can lead you to big losses. In trading, you should keep a minimum ratio of 1:2.
Importance of Keeping Market Knowledge
Keeping market knowledge is very important in online trading. It helps you make decisions to buy and sell stocks at the right time, and if you have a trade going on, whether you should stay in that trade or square off the trade.
There are many benefits of keeping market knowledge, such as:
- Better Decision Making: When you know about market activities, economic conditions, and company performance, you can make better trading decisions.
- Reducing Risk: Market knowledge makes you aware of potential risks, allowing you to avoid them or reduce your risk.
- Better Timing of Trades: When you know based on information in which direction the market can go, you can take trades at better times and earn profits.
- Increasing Confidence: Market knowledge gives you confidence and prevents you from making wrong decisions out of fear or greed.
Benefits of Online Trading
Financial Freedom: Benefit of Online Trading
Online trading provides opportunities for financial freedom. When the economy grows, it leads to an increase in corporate earnings, this happens because economic growth creates more employment opportunities, resulting in more income and more sales.
Fast and Smooth Transactions: Online Conveniences of Trading
Due to the convenience of online trading, traders can make decisions immediately by looking at the current price, and the broker settles your order in very little time.
Trading Tips
- Don’t start trading without knowing “what is the stock market, what is online trading, and how to do online trading”. Before starting online trading, you should have all the information about trading.
- After knowing “how to open a demat account”, open a demat account only with a good broker. Before choosing a broker, pay special attention to demat account fees and the advantages and disadvantages of a demat account.
- Always use stop loss in trading. Stop loss means that if the market goes against you, how much maximum loss you can take in that trade and at what price you want to sell it at a loss.
- Focus on risk management, don’t risk more than 2% of your capital in one trade. In trading, 60% is psychology, 30% is risk management, and 10% is strategy. You get better at trading psychology over time, while in risk management, you have to pay attention from the beginning of trading.
- Most people make losses at the beginning of trading, so start trading with less capital or paper trading.
- Don’t start trading without a strategy. Adopt a tested strategy for yourself with a winning probability of 60% or more.
- Always take trades with a 1:2 risk to reward ratio. If this ratio is less in any trade, you can skip such trades.
- Make a trading journal to know your mistakes in previous trades and keep details of your trades in the trading journal.
- Keep learning from your mistakes, try to control your emotions, and follow the rules and trading plan you have made.
Conclusion
Even after knowing “how to learn online trading”, it may take time for you to be successful in trading. There is only one way to be successful in online trading: keep learning from mistakes and keep moving forward by correcting mistakes.
Through this blog, you learned what online trading is, how to do online trading, how to learn online trading, the benefits of online trading, and some tips.
I hope this blog “How to Learn Online Trading” will help you learn trading and advance in trading. If you have any questions left, comment below.
(FAQs)
How to start online trading for beginners?
To start online trading, choose a reliable broker and practice by opening a demo account. Gain knowledge about the market, understand various trading strategies, and start with small amounts. Be patient and keep learning continuously. Remember, investment involves risk, so invest only as much as you are prepared to lose.
How to learn trading from mobile?
Learning trading from mobile has become very easy nowadays. You can start with the following methods:
Demo Account: Most brokerage firms provide demo accounts, which allow you to practice trading without investing real money.
Online Courses: Many websites and apps offer trading courses for beginners, free or paid.
YouTube Videos: There are many Hindi channels on YouTube that provide detailed information about trading.
Books and Blogs: Many books and blogs related to trading are available.
Brokerage Firm Support: You can also take guidance from your brokerage firm.
Which trading is best for beginners?
Day trading can be a good option for beginners who are willing to invest time and effort to learn markets and develop their trading skills.
How to learn share market for free?
Finschool is an open-source free-to-learning platform. Access to this platform is lifelong, and all free courses can be accessed for free by all users.