Looking for Low Brokerage, High Margin & Free Tips?
Understanding of Stock Market
| | Share Market | No Comments
More On Share Market
When it comes to investment, gaining the right knowledge becomes important. In other words, the understanding of stock market is crucial to make a well-informed trading decision.
With the right knowledge, you would choose the right stocks by doing the in-depth and correct fundamental and technical analysis of stocks.
This not only helps you in making a wise investment decision but also trains you to avoid certain mistakes that can lead to the loss of your hard-earned money.
So, if you are a beginner and looking forward to understanding the share market then here is the document for you that helps you in knowing the benefits, and in knowing various parameters that you should consider before entering into the trade.
Let’s get started!
Also Read: Stock Market Learning Apps
Understanding Stock Market for Beginners
Giving an examination or setting up a new business, requires clear knowledge and understanding.
Similarly, when you are investing in the stock market it becomes important to gain a clear idea of stocks and terms related to them.
The stock market is the most confusing platform, especially for beginners. Many people enter the stock market with long term financial goals but fail because of incomplete understanding and knowledge.
If you are confused about how to start investing, learn how to enter in the Stock Market?
When you make up your mind to invest, start understanding stock market by availing yourself the basic idea of different types of financial instruments like bonds, shares, derivatives, and mutual funds.
Also, read Rank MF, if you want to choose the right Mutual Funds for you.
Other than this, understanding your own objectives help you know how you want to enter the market. If you only want to earn a profit, then trading is an option for you but entering the market with the objective of wealth creation can be fulfilled by investing in the right stock.
So clear your mind and plan strategically to make the best use of your money.
To begin with, the understanding of the stock market starts with the knowledge of exchanges.
The stock exchange is the centre of the stock market that plays a vital role in carrying out the transaction between traders of financial instruments and targeted buyers.
India has two major stock exchanges Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). These exchanges set rules and regulations that are adhered to the Security and Exchange Board of India (SEBI).
Thus, the stock exchange is a platform for both buyers and sellers to trade their financial tools during trading hours.
In simple terms, exchanges are the platform where traders can buy or sell stocks of the listed companies and can convert their investment into cash.
Also, you might have come across the term “Unlisted Stocks“? Unlisted stocks are of the companies that are not listed with BSE and NSE. And it is safe to invest in such stocks as the stocks are of mostly startup companies that are in initial growth.
Thus it is up to your decision whether to invest in listed or unlisted stocks. Thus, it is advisable to only invest in the stocks of the companies that you are sure about. For that know about How to Buy Unlisted Shares? and make your procedure simple.
The indices, SENSEX, and NIFTY help investors to invest in the actively traded stocks and in analyzing the companies that are performing well and offering good returns over time.
Gaining a proper understanding of indices helps investors in building their own portfolios.
To get in-depth knowledge of the stock market there are many options like books, online platforms, apps, and videos. Through which you will get the information about the Sectors in Stock Market and can invest accordingly.
In the further document, we will give you a clear idea of how to read charts, graphs, and the working of the stock market.
To avail of the complete information stay tuned!
Understanding Stock Market for Beginners Books
When it comes to gaining ample knowledge and information about particular stocks, books come first, and therefore every beginner investors prefer referring to books for understanding the stock market.
Now the confusion begins, which book to refer to begin and gain expertise in the stock market.
So enhance your knowledge and wisdom about investment and the stock market by picking the right stock investment books.
Here is the list of some of the important books that prove to be fruitful for beginner and experienced investors.
- The Intelligent Investors by Benjamin Graham & Jason Zweig
- How to Make Money in Stocks by William O’Neil
- When to Sell by Justin Mamis
- Irrational Exuberance by Robert J. Shiller
- Stock Investing for Dummies by Paul Miadjenovic
- A Random Walk Down Wall Street by Burton G. Malkiel
- Market Wizards, by Jack D. Schwager
- Stocks for the Long Run 5/E by Jeremy J. Siegel
By understanding your objective, pick the one that helps you in gaining a better idea and knowledge of the stock market.
Other than this there are some technical analysis books that help a trader in understanding the concept of volatility, chart patterns, price actions and lot more.
Here are a few books enlisted below:
- Getting Started in Technical Analysis By Jack Schwager
- Technical Analysis of Financial Markets By John J. Murphy
- Technical Analysis Explained By Martin J. Pring
- Japanese Candlestick Charting Techniques By Steve; Nison
- Technical Analysis By Charles D. Kirkpatrick II, Julie R. Dahlquist
Understanding Stock Market India
Understanding share market is important before you step into the world of trading and investment.
In India, by looking for the right platform you would be able to understand the way to trade, different types of financial instruments, different types of stock market and different trading strategies that reaps you a good profit over time.
In fact, knowing the difference between the stock market and share market is also crucial.
Now coming to the point of understanding stock market, let’s begin with the concept of the primary and secondary markets.
In simple terms, when the company brings its shares public for the first time, i.e. issue IPO it is called the primary market. Later, the listed stocks are traded further in the secondary market.
That is why it is important to know the difference between Listed Stocks and Unlisted Stocks and make your decision accordingly.
So, either you invested in IPO or buy shares from the secondary market you become the shareholder of that particular company. In return, the company provides you with the dividend for the shares you hold on the basis of the profit it earns.
Next comes the different types of stocks.
These stocks differ from each other on the basis of market capitalization and are categorized as Large Cap Stock, Mid Cap, and Small Cap Stocks.
Large Cap Stocks: These stocks are those that are well established and have a strong presence in the market. For eg; the stocks of top IT companies like Infosys, TCS comes under the large-cap stocks.
Mid Cap Stocks: These companies are growing with the potential to become big, but are riskier as compared to the large-cap companies.
Small-Cap Stocks: It includes start-up companies. Since they are in the beginning face of their development, investing in their stocks is highly risky as compared to the other categories.
Gaining a proper understanding of these stocks helps you in picking the right stock for investment.
Understanding How Stock Market Works
Once the company gets listed on the stock exchange, the stocks issued by the company are then traded in the secondary market.
This buying and selling of stocks are done by the broker or brokerage firms who acts as a middleman between the investor and exchange.
The is the one who passes the buy order for shares to the exchange. The exchange then looks for the sell order for the same share.
The seller and buyer are then fixed and agree upon a certain price. On finalization, the exchange then communicates with the broker to confirm the order who further provides detail of the order to the trader.
Along with this, the exchange confirms the detail of the buyer and seller to ensure that both parties are reliable.
Once the information is availed, the ownership of shares is transferred from the seller to the buyer thus marking the end of the settlement cycle.
Earlier, the process of transferring shares takes a few days to a week, but with online trading, the whole process is brought down to T+2 days.
For example, you bought any share today, then it is deposited to your Demat account after two days.
On completion of the transaction, the broker issues a contract note containing details of transactions like trading date and time.
Here it is important to note that at the end of each trade, an investor has to pay brokerage fees, stamp duty, and transaction tax to the broker.
Understanding Stock Market Trading
Once you gain a proper understanding of the stock market the next important step is to know the whole process of trading.
On one hand, where the stock market is lucrative, it is risky as well. Therefore, it becomes important to gain a complete and proper understanding of stock trading. It helps you to trade like an expert and eventually helps you in meeting your investment goals.
To reap the maximum benefits of trading and investment it is important to understand your needs as well. What kind of investor are you? Apart from this knowledge about your investment goals and risks associated with it helps you in making a better trading decision.
Understanding Stock Market Investing
Understanding stock market investing is all about gaining knowledge of how to read balance sheets, knowing about the company’s investment, and different fundamental ratios.
This is important as investment in stocks for the long term is all about holding shares and investing for years. Here it becomes important to know the proper concept of best stocks for long term investment.
To reap maximum benefits and return, learn about the different financial segments in which you want to invest.
Since there are many different types of financial segments it often becomes confusing for beginners to pick the right option.
The broker offers multiple segments like bonds, equity, derivatives, commodity, currency. With the right understanding of stock market trading, you would eventually be able to choose the one that can offer you maximum returns.
Apart from this, look for the brokerage plans associated with the trading segment and other charges associated with the trade.
Gain the maximum information and understanding of stock market terms to invest without any confusion and to earn good profit and return on investment.
How to Read Stock Market Data?
To start an investment or trading analysis of stocks becomes crucial. So if you are thinking to start an investment journey then here is the way that can help you to succeed and to earn a good return.
Knowing the basics and gaining an understanding of reading stock market data helps you to make a better decision and get into investing like an expert.
This involves understanding chart patterns, gaining knowledge of different types of indicators and their usage, clearing the concept of trading and different types of segments, etc.
Apart from this, how to pick the right stock, gaining a better understanding of stock prices, etc helps you in making a wise and smart decision.
Understanding Stock Market Charts
When it comes to trading and investing reading stock market charts becomes important. But if you are beginner reading and understanding charts requires core skills and knowledge.
So before jumping to learn about them, let’s know what is share market charts.
In general, share market charts or technical charts helps you in identifying the current trends and trend reversal of the stock.
Along with this, it creates trading signals and movement of future prices and gives you the idea of the stock price over a particular time frame.
Here is the list of different types of stock market charts that helps you in gaining the proper insight of price movements:
- Candlestick charts
- Point and Figure Chart
- Area Chart
- Line Chart
- Bar Chart
To read the chart for stock analysis the major point is to identify the chart, choose the window, and look at different time frames to understand the longer and shorter time frame.
The charts also help you in tracking the price and volume of stocks being traded in a particular time frame.
Understanding Stock Market Candlesticks
Among different charts, candlesticks chart types are the most common among traders as they are easy to read and interpret.
By reading the Candlesticks charts you can get an idea of the open, high, low, and close prices of the stock. Here, for example, you set the time frame of ten minutes then a new candlestick chart is created after every ten minutes.
Also, the candlestick charts depict the current period as the price moves over a particular time frame.
In short, these charts are used to understand and determine the price movement of the stock on the basis of past patterns.
To understand the candlestick charts make the best use of the free trading platform or the web-based charting platforms.
For a better understanding of stock market charts and in-depth analysis of stocks choose the one-minute time frames to get lots of candles.
So, if you want to gain a complete understanding of stock market charts then open a demo trading account or web-based charting platform.
On grabbing better learning you can move ahead with the right trading opportunities.
Understanding Stock Market Prices
When it comes to the stock price, it is directly proportional to the value of the worth of the company.
The price of the stock is an indication of the current value that it offers to its buyer and seller.
To invest in a particular stock the stock investor must look for the undervalued stock of the company i.e. for those shares whose prices do not reflect their true value.
In general, the stock price directly depends on the supply and demand of the stock.
For example, if there are more buyers than sellers then the stock price climb. On the other hand, when there are more sellers than buyers, stock price drops.
Apart from the stock price, look for the intrinsic value which includes tangible, intangible factors and fundamental analysis of stocks.
The understanding of stock price is important as most investors make a wrong investment decision by only looking at the stock price.
No wonder, stock price plays a vital role in making an investment decision but relying only on the prices can lead to losses.
So what other things or factors should be considered to get the right value of the investment?
It is capitalization!
The market cap of the stock helps you in knowing whether it is valuable to invest in that particular stock. The knowledge of the market cap helps you in grabbing a better idea of the company and the stock value.
In simple terms, the stock market price is actually the percentage change in the market cap of the company at a particular point in time.
So, any change in the price of the company directly affects its market cap that generally raises a big concern among traders.
Here, when it comes to trading and investment, the price of the stock is driven by supply and demand. Thus the stock market is similar to another economic market
Conclusion
Understanding of stock market gives you investment ideas and opens a better opportunity to trade and invest in the right stock.
From graphs to charts and stock prices you would be able to gain a proper understanding of the financial health of the company that further helps you in making the right investment or trading decision.
So get into the stock market world by grabbing all those opportunities that can offer you the right understanding of stocks.
If you are looking for the right platform to know and learn the stock market then download the stock market learning app StockPatshala.
Grab understanding and ready to invest? Get started by opening a Demat Account. To open the account, fill out the form below:
More on Share Market