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Basics of Stock Trading


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Before one starts trading, it is important to understand how the stock market works and how to evaluate stocks before trading. View the presentation to get an insight into the basics of stock trading:

Basics of Stock Trading

  1. 1. Basics of Stock Trading Demystifying Stocks
  2. 2. Introduction There are many traders whose trading style are based on blind faith or are limited to “this stock is going up so we should buy it.” This group of traders invests like the masses and then wonders why their results are mediocre as they don’t understand the basics of stock markets and mostly end on the losing side. So before one starts trading, it is important to understand how the stock market works and how to evaluate stocks before trading.
  3. 3. First things first •The first step before starting any kind of trading or investing is to analyze their risk and return profile and then invest and trade accordingly. •For example, if the investor has low risk profile than he should not trade and should also not invest in high beta and growth stocks with high P/E ratios. •And only if the investor has high risk profile then should he trade in stock markets and invest in risky stocks.
  4. 4. Basics The following are some of the basic things one should understand before venturing into stock trading: 1. Understand the basics of stock market: Before venturing into stock market one should try and understand how the stock market works, what moves the price of the stocks and how to trade in stocks. Only once this is clear than only one should start trading.
  5. 5. Basics 2. Understand trading strategies: Once it’s clear how the stock market functions one should try and understand various methods used for trading like trades on the basis of techniques of technical or fundamental analysis. If one does not base his trades on sound analysis then it’s more of gambling rather than trading.
  6. 6. Basics 3. Evaluate the business and stock both: Before buying and trading stocks it is not only important to evaluate the stock but it is also important to evaluate company level factors like corporate governance and management. 4. Try back testing the trading strategies: Before entering the stock market it is always advisable to back test the trading strategies.
  7. 7. Basics 5. Consistent trading strategies: Always try and have a consistent approach towards Trading. Don’t change your strategies too much. If one trading strategy is resulting in consistent losses then only strategy should be changed but at the same time one should try and evaluate the reasons for the failure of the strategy.
  8. 8. Basics 6. Always Diversify: Never put all your money in one trade or investment. Always try to diversify your trades. Nobody is 100% accurate in the stock market and even the best of trading strategies can result in losses. 7. Always do your own research: Do not invest on tips and hints given by others. Trade only if you believe on the basis of research that the stocks are worth investing.
  9. 9. Basics 8. Cheap stocks are not always multi baggers: Some traders feel that cheap stocks are undervalued stocks but that is not always the case. Do not think that low priced shares are always cheap. Buy stocks only if you think they are undervalued.
  10. 10. Basics 9. Avoid averaging: Do averaging of stocks only if you think that at current prices the stock you are investing in is the best available option. 10. Trading is always risky: Equity investments and trading always come with some risks. Only trade and invest in equity if you are willing to take such risks.
  11. 11. Basics 11. Use stop loss: Nobody can predict the stock market and even proven strategies can go wrong at times so it is always advisable to use stop loss to restrict your losses. It is generally seen in the market that traders hung on to losing investments for longer period of times because of fear of loss.
  12. 12. Conclusion •When you are starting to trade, it is best to start small and take risks with money you are prepared to lose. •As you gain confidence and become more adept at evaluating stocks and reading the market sentiment, you can start making bigger trades and investments. •It is always advisable to start learning to trade in more stable markets before jumping into the volatile markets.
  13. 13. Thank You • READ MORE Twitter Website Facebook
  14. 14. Disclaimer: Kotak Securities Limited, Registered Address: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 051. Correspondence Address: 6th Floor, Kotak Infinity, Building No. 21, Infinity Park, Off Western Express Highway, General AK Vaidya Marg, Malad (East), Mumbai 400097. Tel no: 66056825. SEBI Registration Numbers: NSE INB/INF/INE 230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCX-SX INE 260808130/ INB 260808135/INF 260808135 , NSDL IN-DPNSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance Officer - Mr. Sandeep Chordia. Tel. No: 022 6605 6825. Email id: In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: • For Demat Account related queries: • • Alternatively, you may feel free to contact our customer service desk at our toll free numbers 18002099191 or 1800222299. You may also call at 30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at and if you feel you are still unheard, write to our customer service HOD at