One of the most popular terms in the post-COVID-19 pandemic era is equity trading. But why did it suddenly become so popular? Stock markets also existed earlier, so why are people now so involved in equity trading? Since the market’s dip in March 2020, the NSE Nifty 50 has jumped over 200%. The total value of India’s stock market now stands close to $5 trillion, as investors have become more confident in the country’s economic future.
The pandemic changed our way of life and individuals’ approaches to making investments. Large sums of money were intervened by central banks all around the world to support their own economies. This has significantly altered public perceptions of the stock market. In August, the National Stock Exchange (NSE) reported that there were over 10 crore registered investors in India. One crore new investors were added in just five months. Well, this demonstrates how swiftly the industry is expanding.
Several factors have fuelled this increase in new investors. More people are finding stock trading intriguing due to more digital platforms, increased awareness, and simpler market access. Additionally, the robust stock returns following the pandemic have attracted large investors to the market.
With this, we can clearly see the rise in equity trading and the growing interest of investors. But now, we should understand what equity trading actually is in the stock market. So, here is a brief guide for you.
What is equity trading?
Let’s understand equity trading. Buying and selling shares of companies that are listed on stock exchanges is known as equity trading. Through this activity, investors can take part in and possibly profit from changes in the securities markets. With equity investment, you can earn profits that can beat inflation.
How Do I Start Trading in Equity?
The following steps will assist you in beginning to trade stocks:
Create a Demat Account
To trade or make investments in the stock market, you need to open a Demat account. The securities you buy are electronically maintained in this account. You can also consider demat account opening online with HDFC Sky.
Recognise Stock Prices
A stock’s price fluctuates a lot for a variety of reasons. You may simply enter or exit a transaction at the appropriate time if you are aware of the elements that affect stock prices.
Gain a Basic and Technical Understanding of Stocks
A stock’s intrinsic value can be better understood through fundamental analysis. You have to take a number of things into account while assessing a company’s fundamentals, including assets, earnings, obligations, etc. Additionally, a stock’s technical analysis might assist you in forecasting future price moves.
Set a Stop Loss
Given how often stock values fluctuate, making a poor trade could result in you losing all of your money. You must set a stop loss in order to prevent a significant loss. The stop loss price will assist you in minimising your loss when you exit the stock.
Which Equity Trading is Best for Beginners?
Investing in stocks can be an exciting and lucrative method of increasing one’s wealth. However, it can also be a difficult procedure.
If you are new to stock trading and investing, it is important to remember that building a strong portfolio takes time, and the amount of work you put in will determine your success.
Beginning with a small amount of money is among the most important things a beginner can do. Even though this might not seem like much, particularly if you’re just getting started, it will make a big difference in the portfolio you develop.
A financial advisor can also assist you in making wise trading decisions. Following a particular single trading technique for a while might also help make easier stock trading. By doing so, you’ll reduce the number of different variables that you need to keep track of. This will also assist in clearing up some of your confusion. In addition, to be successful at equity trading, you’ll need to study the stock market as much as you can.
Understanding the Risks of Equity Trading
Trading in equity stocks does carry some risks. The following are a few typical risks you might come across:
- The volatility of the market: The price of stocks might fluctuate. The stock market may fluctuate due to events such as political turmoil, economic developments, or even global events. The stock market can become risky because of these uncertainties, which may impact equities stock prices.
- Lack of Knowledge: A lack of understanding of the equity market results in bad decision-making. Many newcomers enter the stock market without having a basic understanding of the industry. There can be huge losses as a result of this. So before you begin, it’s important to understand precisely what equity in stock trading is.
- Overtrading: In an effort to turn a profit quickly, some traders might purchase and sell too frequently. This may result in heavy losses and increased transaction costs. Instead of trading stocks on the spur of the moment, one should use a thoughtful strategy to do so.
- Emotional Decisions: From fear and greed, one can become involved in emotional trading. For instance, fear may cause you to sell your shares too soon, whereas greed may cause you to hang onto a stock for an excessive amount of time. In stock trading, emotional control is important.
Conclusion
Overall, equity trading can be a great way to grow your money, but it comes with risks. Before investing in the equity market, you need to understand and manage risks carefully. Without a solid strategy and knowledge, it’s easy to face significant losses. Being informed and cautious can make all the difference between making profits and losing money in the equity market.
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!
Frequently Asked Question (FAQs)
Is equity trading a safe investment ?
Investing in company shares through equity trading exposes investors to market volatility, so it’s not completely risk-free. To reduce risk, you can, as an investor, invest for the long term and diversify your holdings. Prior to making an equity investment, it is essential to speak with a financial advisor.
Is equity trading chargeable ?
Sure, trading stocks has a cost associated with it. The cost of the exchange, the type of trade, and broking are some of the variables that affect charges for equities trading.
What are the risks of trading equity ?
Risks associated with equity trading include:
- Market volatility, which causes stock prices to fluctuate dramatically.
- Company-specific risks, which are linked to a specific company’s performance.
- Liquidity risk results in price fluctuations when buying or selling stocks quickly.
- Risks associated with political and economic changes can impact investor sentiment and overall market conditions.
Making wise trading decisions requires an understanding of these dangers.
