How to Trade Stocks Online?

Illustration: Two friends, Anil and Neeraj, who also happen to be colleagues, live vastly different lifestyles. While Anil struggles to make ends meet with his salary, Neeraj enjoys a growing bank balance. This is due to the fact that he is proficient in stock trading online and through it, enjoys a second source of income.

Observing his financial success, Anil seeks to enter the online stock market. However, he has zero knowledge in this area. As a beginner, how can he start investing and trading in the Indian stock market online?

This is a common dilemma among young professionals today, who look towards building their wealth through diverse means, online stocks being the favorite one.

The Basics of Online Trading

Stocks are the ownership of a company, broken down into small parts, thus, anyone with a stock of a company has part ownership of that company. If you wish to trade stocks online, then start by opening a Demat Account (for storing your shares in an electronic form) and Trading Account (to place orders for the buying and selling of stock options).

All your shares will be shown systematically in your Demat account, so you don’t need to carry physical share certificates.

As far as India is concerned, BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are the two big players where a major chunk of stock trading takes place.

Stock Up on Your Knowledge

To understand the workings of any stock market, it is important that you learn as much as you can.

These days, books, as well as various online sites and seminars provide a wealth of information for online stock trading. It proves to be a big help in learning the various features and tools of this dynamic platform. Books like ‘How to Make Money in Stocks’, ‘Market Wizards’, ‘Trade Your Way to Financial Freedom’, ‘The Intelligent Investor’ etc. are a great way to get a crack at the financial market.

Before opening an account, be sure that you know what you’re getting into. Share market is not for earning a quick buck or a get-rich-overnight scheme. It demands hard work and a lot of planning to achieve a monetary return.

After all, as Benjamin Franklin said, "An investment in knowledge pays the best interest."

Practice Your Trade

As soon as you feel comfortable with the market, start practicing by investing in small denominations. By doing this, you get a practical knowledge of the market workings and can start towards bigger investments.

For beginners, it is advised that they keep their investments diversified. Investing in a broad range of financial instruments lessens the risk of losing it all in one go. Eventually, with experience, you can calculate your risk/reward and invest accordingly.

Stay Updated with the Market

It is of utmost importance to keep a pulse on the market happenings to protect your investment interests. Financial news sites are a great source of current market trends and help you to monitor the markets each day.

Due to online trading, there is no need to depend on any trader or broker for buying and selling your stocks. It is convenient and you rely on your own intellect to make investment decisions. All in all, it is a good way of creating your own wealth.