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If you are planning to start trading at the stock market and earn profit from trading in stocks, here we are providing an effective guide to start with.
Primary requirement for stock trading – For trading in stocks you primarily need to tie up with a stock broker and open a DP account. A stock broker can be a person or a company who will execute your buying and selling orders at the stock exchange. For this service he will charge you a fee that is commonly known as the brokerage. The DP account is used for depositing the stocks that you buy at the stock market. When you sell the stocks it will be deducted from your DP account and your profit will be deposited to your account. These are the primary requirements and the basic idea of the process of stock trading. You can either do this through conventional way of offline trading where you will instruct your stock broker for buying or selling certain stocks or you can choose to trade online. In online trading you will be buying and selling the stocks through the online portal of your broker. It is your broker who will offer the real time ask or bid price of the stocks and if you choose to trade he will be bound to honor your trading request sent through the online medium.
Different modes of trading – At the stock market you can choose to buy the stocks in different ways. In other words you can choose to do stock trading in different modes. Broadly there are two classifications in stock trading – the cash segment and the derivative segment. In cash segment you can simply pay for the stocks that you are buying and the stocks will be deposited to your DP account. In derivative trading you will be buying contracts rather than stocks itself. There are two types of contracts that are most widely used – the future contract and the option contract. In derivative trading, you as a buyer will be buying or selling the ‘Lot’ consisting of number of stocks. Another classification of stock market trading is made on the basis of payment of stock prices and they are – margin trading and delivery based trading. In delivery based trading you will be paying the entire price of the stocks that you are buying at a point of time. In margin trading you will be paying a certain portion of the price of the stocks that you are buying. In margin trading you have to square off the trade within a day or within the specific time period.
Now these are the different ways of buying stocks at the stock market. You have to decide what is the perfect mode of trading for you? For that you have to consider a few things like your fund for investing in stock market, your ability to take risk and of course your resilience to withstand losses. There is another aspect that is equally important for deciding on your trading pattern that is your objective of stock market investment. Before you choose the method for investing in stock market you need to have a clear conception of why you are buying the stocks. And remember it is not the profit we are talking about. Anyone who is investing in the stock market is doing that to get profit. That is alright, but how you want to get that profit? Do you want to increase your investment over a period of time or do you want a regular income from the investment or you want to make stock trading your profession? Your way of trading should be decided on the answer.
If you want to increase your bottom line over a period of time with least risk long term delivery based trading in the blue chip or the large cap stocks should be your area of investment. These are the stocks that move upward in stock market in a slow but steady manner. This is perhaps the most secured form of stocks market investment you can have and you will surely make profit at long run from this investment. On the other hand if you want to get regular incomes from stock market trading and ready to take risk, it would be best for you to opt daily trading. This form of trading is bit risky but can get you quick and good return from your investment.
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