Stock trading is not a get rich quick plan. It calls for a systematic approach. A successful trader will have to spend time, learn the systems, find out the systems that best suits him. It is a wrong belief that trading is something which can be done by anyone by just investing his money in the stock market. This kind of approach to trading is the best way to lose money. Before you venture into stock trading you should learn about the basics of trading. I have tried to bring out in these pages the basics of trading that I learnt while learning to trade in stocks.
I will be regularly updating this page so that you can make money with little capital that you can afford to invest and enjoy it. Remember, you will do a better job of anything that you are doing if you enjoy what you are doing.
Many people do not invest in the stock markets because either they are afraid of losing their money or do not know how to go about it. Why are many people afraid of the stock market? They fear to trade because for them stock trading resembles gambling. The truth is stock trading is not gambling. Once you understand what is stock trading and how it works then you will realise that it is just like any other business. You will agree that every business has risks. You have to manage the risks. There are three ways to manage risks:
- You run away from the risk
- You leave it to take its own course
- You manage the risk
Here you will learn how to mange the risk in stock trading so that you can enjoy stock trading while making money.
The basics of trading.
I read a book written by Yogesh Chabbria with the title “Invest The Happionaire Way“. He has given a simple example which I am reproducing here.
He refers to a lemonade company that he set up. His plan was to set up a stall in his school during a fair and sell lemonade. He worked out that he can sell 1000 glasses of lemonade and he will need Rs.1000 as capital for this. He estimated that he can sell a glass of lemonade at Rs.5/- and make a net profit of Rs.4000/- i.e. 400%. To start this business he collected Rs.100/- each from his friends with the assurance that the Rs.100 will become Rs.500/-. In this way he sold 1000 glasses of lemonade and made a profit of Rs.4000/- each investment of Rs.100/- became Rs.500/-
This is the way in which companies work and raise capital from the public. An entrepreneur gets a business idea. He works on it. Thereafter he raises capital in the market by issuing shares. The entrepreneur establishes a company and registers it with the registrar of companies. Thru public offers the company invites the public to subscribe to its shares and individuals apply for the shares. Shares are capital of the company divided into small amounts of equal value distributed to the individuals who have applied for it. Each individual who has been allotted such shares becomes a part owner of the company as long as he is in possession of the shares. Say each share has a face value of Rs.100. Rs.100 becomes the initial investment that has to be made to own a share.
Now comes the stock market. Stock market is the place where one can sell these shares or buy from those who own shares and are willing to sell. The market price of the share is decided on the basis of the performance of the company. If the company is performing well and future performance is expected to be the same then the price of the share will be more than its face value. If the price is Rs.100/- the market price will be anything more than that depending on the future expectations of the investors and its supply and demand. If the performance of the company is not good and the future prospects are also bleak then the price will be less than the face value. The market price will be anything less than the face value of Rs.100/-
How to start trading. A book on basics, how to start trading as a business. It explains in detail.
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Start your business - Stock Trading
A beginners book with easy steps to guide you. $3.99
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