In simple words, Financial Trading is all about buying and selling Financial assets to build a portfolio. Please find below a detailed guide.
It can be carried out in 2 ways: (a)via exchange and (b)over the counter(OTC). Trading via exchange is a highly organised marketplace (like National Stock Exchange, Bombay Stock Exchange, New York Stock Exchange). Trading over the counter is between individual parties where contracts are purchased from the broker.
GOLDEN RULE OF TRADING:
BUY LOW, SELL HIGH, TAKE PROFIT OR RE-INVEST
Lets dive in to the key areas of discussion
What are Financial Assets ?
What is a Financial Portfolio ?
What are different types of Financial Market ?
How to start trading in Financial markets in India ?
How to avoid loss in Financial Trading ?
What are Financial Assets ?
Financial Assets for a party are financial instruments like shares, bonds, FOREX, futures, swaps, options etc. traded in financial markets. Each of these instruments are traded separately and require different kind of expertise to trade. There are thousands of financial markets across globe. In India, we have NSE and BSE. National Stock Exchange, located in Mumbai is the largest stock exchange in India.
What is a Financial Portfolio ?
A Financial portfolio is a pool of financial assets held by individual investors in the trading accounts. By trading account, we do not necessarily mean a demat account. Nowadays, mutual funds are accessible on mobile apps where validation is done via e-KYC and investment can be done without brokerage. To know the best platforms for mutual funds, check out this blog: How to invest in best mutual funds without paying brokerage ?
A financial portfolio can be a combination of equity, debt and hybrid funds. The overall portfolio of any individual includes all his assets and liabilities. To understand more, please access our SPECIAL COURSE ON TRADING.
What are different types of Financial Market ?
There are many types of financial markets across countries, some of them being
Stock market
Bond market
Derivatives market
Commodities market
In the course as highlighted above, the areas covered as part of the course are:
Stock Trading
FOREX trading
Cryptocurrency trading
Commodities Trading
Derivatives trading
All the above areas have been explained with live demo sessions and case studies.
How to start Financial trading in India ?
Please be familiar with these 2 market conditions - Bear and Bull
When someone says, "It's a Bull market". It means that the average stock prices are on the rise and market is going up.
On the contrary, when it's a Bear market, it simply implies that the prices are declining.
When it comes to starting your financial trading journey, it is important you must ensure the following pre-requisites.
Step 1: Start learning about Financial Trading
Learning is a must when it comes to trading on financial markets. Learning How to trade in Financial markets can never be a crash course. Time needs to be given to learn it step by step and then start applying the concepts individually and also in tandem with one another. If you wish to have a detailed 3 months course along with Practice kits and case studies, enroll for P# Trading Guide (90 days course).
Step 2: Open a Demat Account
Demat account is the foremost step to be able to trade in stocks. Based on countries, there are different brokers who offer trading accounts. Some of them also offer assistance on your initial investments. Be mindful that these initial purchases are never permanent stops to make money, as margins are always less and these are means to influence new investors to invest more.
Once you open a demat account, don't jump into trading. Get yourself familiar to the interface and understand the significance of each term that is used there.
Step 3: Stay updated with the current market and learn how to analyse news articles
For beginners, there are multiple websites that are pretty useful when it comes to staying updated on the market. Some of them are investopedia.com, moneycontrol.com, investors.com. The websites give a clear idea of the historical data along with the status of different ratios that you would be studying. It would also give the updates on the latest developments.
News articles like. "Company ABC pvt. Ltd. is going to acquire Company XYZ pvt. Ltd." are very important to predict the future trend. These are not straight forward as it seems. It requires you to keep a close look at the delta changes in values.
Step 4: Practice trading
Once you have understood the terms and learnt how to analyse the facts, its important to practice before jumping to the real field. Take a single stock and track it for exactly 31 days. To know understand why 31 days, check out my free e-book on Why 31 days of observation is required for analysing a stock ?
For practice, Investopedia offers a simulation game called Stock market game. Use it for a live practice session.
How to avoid loss in Financial Trading ?
Now that you have got a fair practice, you start with your first investment.
Is that it ? Will you make money now ? Is this where analysis ends ?
Of course No. This is where the real analysis starts. Now that the investment is made, you would not want the price to come down and make you a loss. Rather, a close track of the activities happening with regards to the instrument must be done such that we can close at the right moment to take out our money and make profit. Learn how to cut your losses short.
I have 2 wonderful kits for you in my trading bundle - How to analyse if it is time to close and How to analyse if it is time to buy again.
Conclusion
In the above article, we learnt the basics of Financial trading, the types of Financial markets and the steps to be taken to start your Financial Trading journey. Following the above tips, many of our students have made fortunes for themselves.
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