Sharekhan Blog

How To Start Online Trading?

  • Mar 4, 2024

However, effective online trading requires understanding key concepts first. This article examines fundamentals like how to start trading online, platform selection, strategy development and risk management by empowering new traders to build profitable investment portfolios over time confidently.

Online Trading Fundamentals

Online trading facilitates directly purchasing and selling supported financial instruments using a broker's proprietary internet trading platform. This disintermediates traditional routes involving financial advisors executing orders on your behalf for a fee. You now fully control order entry timing and asset selections based on your market analysis.

Common online tradable assets include:

  • Stocks - Representing fractional ownership of listed companies
  • ETFs (Exchange Traded Funds) - Baskets of assets tracking indices
  • Forex (Foreign Exchange) - Speculating on international currency shifts
  • Commodities - Futures trading gold, silver, oil, etc.
  • Cryptocurrencies - Decentralised blockchain-based digital assets

Trading platforms conveniently provide live interactive charts, real-time quotes, macro news feeds and order management screens suiting self-directed style investing from anywhere, anytime.

Considering Top Trading Platform Competitors

Established brokerages like Zerodha, Upstox, and Angel One all offer feature-rich online trading capabilities. However, beyond baseline must-haves, their fee structures, asset availability, tools stacks, and overall user experience can vary greatly for new investors.

How to Start Online Trading

Follow these simple steps on how to start trading online:

Step 1: Select the Right Online Broker

Research is crucial not just for investing but also for selecting a trusted brokerage partner. Make sure to choose a reputable brokerage registered properly with SEBI for legitimacy and regulatory oversight.

Take time to assess the range of financial products and services offered by shortlisted brokers to determine how many of your needs can be served on one integrated platform.

A full-service brokerage like PL providing integrated access spanning investments, insurance and lending alongside value-added research and advisory services can fulfil every modern personal finance requirement. This consolidation also enables seamless guidance as you undertake wealth-creation journeys.

The best way to trade stocks online starts with cautious preparation, making online trading's flexibility and growth potential available to any diligent retail investor today.

Step 2: Setting Up Your Trading Account

Once you've chosen an online brokerage, the next step is opening a Demat (dematerialised) account and Trading account to activate online investments. These two accounts work hand in hand to enable a smooth digital trading experience.

Think of a Demat account as a special bank account that securely stores all your stock and fund ownership in electronic format rather than physical certificates. This account captures your transaction history and current portfolio holdings across exchanges. Pairing this with an active Trading account then allows you to buy and sell financial securities online through your broker seamlessly.

Together, these unlocked accounts reduce friction, speed up order settlement, decrease costs and streamline documentation versus traditional offline trading. The process of opening them is also now very quick and simple through digital applications.

To open your Demat and Trading accounts, you'll need to provide essential identity and bank verification online:

  • Pan Card
  • Photo ID Proof
  • Residence Address Proof
  • Bank Account Details
  • Income Proof
  • Digital Photograph

By readying these key documents, retail investors can activate their online trading access in minutes and fund accounts via integrated bank transfers to commence actual investing. The hassle-free process makes entering financial markets easier than ever for first-timers today.

Managing Risks to Preserve Trading Longevity

While participating in financial markets does carry inherent volatility risks, certain best practices help balance profit potential with minimised capital loss:

  • Position sizing prudently - Limiting exposure per trade to ~1-2% of total capital preserves longevity despite occasional draws.
  • Applying stop losses diligently - Automatically exiting trades at pre-defined levels before incurring a greater loss.  
  • Diversifying asset classes - Balancing investments across instruments exhibiting some degree of negative correlation during downturns offers stability.      
  • Tracking news and disclosures - Staying updated on significant corporate and macro developments provides perspective navigating events impacting portfolio holdings positively or negatively for informed decision-making amidst flux.

Additionally, only allocate truly disposable income rather than overexposed capital from loans or emergency funds into the stock market platforms.

Understanding the Legal and Tax Perspectives

Online trading does warrant basic documentation for legal and tax diligence:

  • Income tax return declaration
  • Transaction receipts for capital gains tax
  • Validating broker SEBI registration

Additionally, certain profit margins and transaction volumes may necessitate official business registrations. Maintain clean records meeting regulations to avoid complications.

Conclusion

By self-educating on online trading fundamentals, tactically formulating strategies, and managing risks, lucrative wealth creation is accessible from the comfort of home today if tentatively pursued with adequate diligence across initial measured steps covered here. Soon enough, profits and portfolio milestones will mirror the knowledge, skills, and disciplined habits developed along the way.

Team Sharekhan
by Team Sharekhan

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