How to Start in The Stock Markets?

You have read 12 chapters till now, understood a lot, now you are ready to start the journey ahead.

Throughout the first module, you have been introduced to the stock market or share market. It has been our endeavor to understand all the topics that you, as an investor, need to know, especially when you are completely new to the market. If you still have questions left in your mind, that’s good, because we will answer them in the coming modules.

Here we also consider it important to explain why we have created so many modules, and how they are interconnected. Take a look again at which modules we have made.

Introduction to Stock Market
technical analysis
fundamental analysis
futures trading
option theory
Option Strategies
quantitative concepts
commodity market
Risk Management and Trading Philosophy
Trading Strategies and Systems
Financial Modeling for Investment Practice

So Many Modules – How Are They Interconnected?

At our blog, it is our endeavor to bring you the best educational subjects related to the share market. The topics covered are Fundamental Analysis, Technical Analysis, Derivatives, Trading Strategies, Risk Management, etc. There is a module on each main topic. But if you are new to the market or say a new investor, then you may wonder how all these topics are related to each other?

In answer to this question, you need to ask a question. What do you think is the most important thing to be successful in the share market? Success in the market means you make a lot of money and if you are not making money, you are a failure. So in answer to my question, many things will come to your mind like risk management, discipline, timing i.e. right decision at right time, information related to market etc.

The importance of these things cannot be denied but more important and primary is to form a point of view.

Attitude is the thing that tells you in which direction the market will go. If you think the market will go up, you have a bullish outlook, and you will buy the stock. Similarly, if you have a bearish outlook, you will sell shares in the market.

But how can you create this attitude? How do you decide whether the market will go up or down?

A proper methodology has to be used to analyze the market in order to form an attitude or approach. There are a few methods you can use to do this test.

fundamental analysis
technical analysis
quantitative analysis
Outside Views

To make you understand, let us give an example of what goes on in a trader’s mind when he is forming his outlook.

Approach Based on Fundamental Analysis – Company’s quarterly results are looking good, with 25% growth in sales and 15% growth in profits. The company has also told good future i.e. Guidance. So all these fundamentals indicate a bullish trend in the stock and hence it is in the buy category.

Technical Analysis Based Approach – Technical indicators are showing bullish momentum and are also accompanied by a Bullish Candlestick Pattern. On seeing this the stock looks bullish for the short term and it can be bought.

An approach based on Quantitative Analysis – The stock’s PE has touched the 3rd standard deviation after the recent rally. The probability of PE breaking the third standard deviation is only 1%. Therefore, it is better to assume that the stock is turning upside down and is ready to be sold.

Outside views – Analysts coming on television are advising to buy in the stock, so the stock can be bought.

Your point of view should be based on your own analysis and not someone else’s, as you cannot hold anyone else responsible later.

What will you usually do after creating your vision? Will you go straight to the market and start trading? In fact, the intricacies of the market begin from here.

If you have a fast approach, then you…

You can buy shares in the spot market.
You can buy shares in the derivatives market.

In derivatives, you can buy futures of shares.
Or you can trade-in options.
An option has a call option as well as a put option.
You can also trade synthetic bullish by taking a combination of call and put options.

So what you will do once you make your point of view is a different game. Choosing the right instrument is what makes your approach successful or unsuccessful in trading.

For example, if I am bullish on a stock for a year, it would be better for me to take that stock in delivery trading. But if I take a bullish outlook for a shorter time frame, like 1 week, then a futures instrument would be a better fit for my trade.

If I am bullish but in that outlook, there are some conditions attached like- I think the market will bounce after the budget speech but I am not ready to take too much risk or risk then option instruments will be better for me.

So overall every player in the market should make his own point of view and choose the right trading instrument for that, then only you can be successful in the market.

Hopefully, by now you have an understanding of how the different modules present a complete picture of the market.

words of flow chart

Fundamental Analysis
Technical Analysis
Quantitative Analysis
Outside view
Point of view
Trading terminal
Spot market transaction
Derivative market transaction
Futures
Options
Call option
Put option

Over 400 strategies can be built using the combination of call and put options.

Keeping this in mind, you will benefit if you read the chapters here at our blog.

In the next 2 modules, you will learn to create PoV – Point of View based on Technical and Fundamental Analysis.

After these 2 modules, when you have come to the point of view, then in the subsequent modules, you will be given information about different trading instruments, so that you can choose the instrument based on your attitude. Also, will tell you successful risk management techniques to improve deals going forward.