Equity Trading: Here's everything you must know

Introduction

Equity Trading primarily deals with buying and selling of shares of a company. These shares get traded publicly or privately, based on whether the company is a listed entity. The Share Market is populated with shares of different companies that traders buy and sell depending on their research and choice. However, be careful while navigating through the Share Market trading as there are many intricacies attached to it.

Understanding the basics

Equity implies ownership. If you hold shares in, say, company ABC Ltd, it means you have a certain level of ownership of that company. Along with an inherent sense of ownership, you can take advantage of Equity Trading if you believe that a specific company share will appreciate significantly and earn your investment and more.

How does Equity get traded in India?

Equity trading mostly takes place on stock exchange platforms. The National Stock Exchange and the Bombay Stock Exchange are the two biggest stock exchanges. In this tech-driven world, the tools needed to engage in Share Market are only a few:

• A Demat and Trading account
• Knowledgeable broker for facilitating your transactions
• Decent online trading platform
• Internet connection to access the live Share Market

Essentials for success in equity trading

People are lured into Equity Trading with the idea of making lots of money through investing in the stocks of successful companies. However, this does not necessarily always hold. Equity Trading is a complex, thought and research-driven exercise which requires in-depth analysis such as:

• Fundamental Analysis: Through this, you can analyse a company's stock value as a resultant effect of varying underlying factors. The fundamental analysis explores these underlying factors and draws prospects of the company and its corresponding stock's value.

• Technical Analysis: This is a relatively specialised technique as compared to fundamental analysis. It aims to study and draw inferences from the Share Market movement to predict the company's stock value. It uses charts and other tools to gauge future price movements of stocks and take trading positions accordingly.

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The pros and cons

Equity Trading comes with a set of benefits and drawbacks:

Benefits

Easy entry & exit: The Share Market is enormous, and you mostly always have takers and givers for shares you wish to trade.

Wealth creation: Through dividends and capital growth of your chosen company's stock, you can look to build your corpus.

Drawbacks

Volatile: There is no guarantee of which direction your chosen company's share value will move in. Also, there is a possibility of significant losses.

No Fixed Returns: Unlike a Debt instrument, Equities do not offer any fixed timely returns and hence cannot be relied upon for a regular stream of cash inflow.

Conclusion

The Share Market is not for the faint-hearted. Your golden rule is to think before trading. The dynamics of demand and supply apply here, deciding the value of your intended company's shares. But if you stick through and indulge in fundamental research before Equity Trading, the results can surprise you.