One of the most popular terms in the post-COVID-19 era is equity trading. But why has it become so popular all of a sudden? Stock markets existed before, so why is there a surge in interest in equity trading now? Since the market took a dip in March 2020, the NSE Nifty 50 has increased by more than 200%. Today, India’s stock market is valued close to $5 trillion, as more investors have gained confidence in the country’s economic growth.
The pandemic reshaped our lifestyles and altered the way people think about making investments. Central banks worldwide injected large sums of money into their economies to support them. This has greatly changed how the general public views the stock market. In August, the National Stock Exchange (NSE) reported having more than 10 crore registered investors in India. What’s interesting is that one crore new investors joined in just five months. This clearly shows how fast the industry is growing.
Several factors have contributed to this rise in new investors. Digital platforms have made stock trading more accessible, increasing awareness and providing easier access to markets. Additionally, the strong stock returns after the pandemic have attracted many investors to the market.
With all these developments, it’s evident that equity trading is on the rise, and more people are taking an interest in it. But now, let’s understand what equity trading actually is in the stock market. Here’s a simple guide for you.
What is equity trading?
Equity trading involves buying and selling shares of companies listed on stock exchanges. It allows investors to participate in the securities markets and potentially earn profits. Through equity investment, one can achieve returns that can outpace inflation.
How Do I Start Trading in Equity?
Here’s how you can start trading in stocks:
Create a Demat Account
To trade or invest in the stock market, you must open a Demat account. This account holds the securities you buy in an electronic format. You can also consider demat account opening online with HDFC Sky.
Recognise Stock Prices
Stock prices can vary for many reasons. Understanding what affects stock prices can help you enter or exit a trade at the right time.
Gain a Basic and Technical Understanding of Stocks
Fundamental analysis helps you determine a stock’s intrinsic value. When analyzing a company’s fundamentals, you need to look at aspects like assets, earnings, and liabilities. Technical analysis, on the other hand, can help you predict future price movements of a stock.
Set a Stop Loss
Stock prices can be highly volatile, and a wrong trade could result in significant losses. A stop loss can help you minimize your losses by setting a price at which you’ll exit the stock.
Which Equity Trading is Best for Beginners?
Investing in stocks can be a rewarding way to grow your wealth. However, it also comes with challenges. If you are new to stock trading, remember that building a solid portfolio takes time, and your efforts will shape your success.
Starting with a small investment is one of the best steps for beginners. Even though the initial amount might seem small, it can have a significant impact as you build your portfolio. A financial advisor can also guide you in making smart trading choices. Sticking to a single trading strategy for a while can simplify stock trading. This helps reduce the number of factors you need to track, making the process easier to understand. To succeed in equity trading, make sure to study the stock market thoroughly.
Understanding the Risks of Equity Trading
Trading in equity stocks comes with certain risks. Here are some common risks you may encounter:
Market Volatility: Stock prices can fluctuate due to various factors. Political events, economic shifts, or global happenings can cause sudden changes in the market. These uncertainties can make the stock market unpredictable, impacting the prices of equities stocks.
Lack of Knowledge: A poor understanding of the equity market can lead to bad investment decisions. Many new investors enter the market without a basic understanding of the sector, which can result in significant losses. It’s important to know what exactly equity in stock trading is before starting.
Overtrading: Some traders may buy and sell too often in an attempt to earn quick profits. This can lead to higher losses and increased transaction costs. A more thoughtful trading strategy is better than impulsive decisions.
Emotional Decisions: Emotions like fear and greed can heavily influence trading decisions. Fear might cause you to sell too soon, while greed could make you hold onto a stock for too long. Controlling emotions is key when trading stocks.
Open a free demat account online with HDFC Sky, one of the best trading app in India and experience seamless equity investment! Also, take advantage of derivative trading, giving you the flexibility to enhance your potential returns. Start your trading journey today!
Conclusion
In conclusion, equity trading offers a way to grow your investments, but it also comes with its own set of risks. Before diving into the equity market, it’s essential to understand and manage these risks. Without a clear strategy and proper knowledge, one can face significant losses. Staying informed and cautious can be the difference between making profits and losing money in the stock market.
Frequently Asked Questions (FAQs)
Is equity trading a safe investment?
Investing in shares through equity trading is not completely risk-free due to market volatility. To reduce risk, you can invest for the long term and diversify your holdings. Consulting a financial advisor before making equity investment decisions is also important.
Is equity trading chargeable?
Yes, trading stocks involves costs. These can depend on factors like the type of trade, exchange fees, and brokerage charges.
What are the risks of trading equity?
Risks include:
- Market volatility, causing rapid changes in stock prices.
- Company-specific risks, tied to a company’s performance.
- Liquidity risk, which affects price changes when buying or selling quickly.
- Political and economic shifts that can impact the overall market and investor sentiment.
