I always wondered what is stock market and how people get rich using it?

I wanted to learn and understand Stock Market trading and achieve my dream of financial independence. So in the beginning I started investing in smaller proportions and later on when I was confident I started investing huge amounts with consideration towards risk factors. But, before jumping to the end lets start with some knowledge of Stock Market.

Stock market in simple terms is a place where you can buy or sell companies shares and make a profit on upward movement of a share price or a lose on downwards. So stock market is not always about profitssss.

In stock market we trade in equity(cash), futures and options(f&o),commodities,currencies and many other categories, but for now we will just stick to equity.

How to trade in Equity?

• We buy or sell a company share through a stock broker(mediator for exchange of shares between parties, as authorized by respective government or board of a country).
• Then we need to choose a platform to trade (Usually offered by stock brokers in the form of application, web  or software).
• Later we use fundamental or technical analysis to trade in equity.

Choosing a stock broker and a platform is considered easy as its mostly based on commissions charged by broker and smooth operation of platform.

Tough part is to select a company for investment based on fundamental or technical analysis.Its known that people considering long term investment always select fundamental analysis while for short term investment, technical analysis is preferred. But the choice is ours to make between fundamental or technical analysis as a apart of our investment strategy.

Fundamental Analysis:

Fundamental analysis is a broader term which includes reading financial statements of companies like Annual/Quarter reports and understanding about the industry and the competition. Economic factors like GDP,employment rate,interest rate etc also contribute to fundamental analysis. After studying fundamental analysis we can gain significant understanding about the company and it’s financial health. Economic factors on other hand act as airbags to companies, safeguarding them from uncertainties.  

Technical Analysis:

Technical Analysis is related to prediction of future trend based on historical data. In technical analysis we use candlestick patterns (charts) and oscillators to get a clear picture of companies overall performance and its chances of growth in future. Technical Analysis also considers market psychology i.e  when people are buying or selling in the market (time) or how much they are buying or selling(volume). Technical analysis helps in understanding the market movement and accordingly choosing right strategies to gain profits.

So I would like to encourage you all to read both fundamental and technical analysis before investing in equity or stock market as a whole. 

For any queries, please feel free to get in touch with me on hello@theahad.com