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Complete Trading Guide

Learn about stock market concepts and trading education for educational purposes only

Table of Contents

Trading Basics

What is Stock Trading?

Stock trading involves buying and selling shares of publicly traded companies to profit from price movements. Unlike investing, which focuses on long-term growth, trading capitalizes on short-term price fluctuations.

Types of Trading

Day Trading

Buy and sell within the same trading day

Swing Trading

Hold positions for days to weeks

Position Trading

Hold for weeks to months

Scalping

Very short-term, minutes to hours

Key Market Concepts

  • Bid-Ask Spread: Difference between highest buyer price and lowest seller price
  • Volume: Number of shares traded in a given period
  • Market Cap: Total value of a company's shares
  • Volatility: Measure of price movement intensity
  • Liquidity: Ease of buying/selling without affecting price

Technical Analysis

Technical analysis involves studying price charts and patterns to predict future price movements. It's based on the premise that all relevant information is reflected in the stock price.

Key Chart Patterns

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Support & Resistance

Price levels where buying/selling pressure emerges

📊

Trend Lines

Connect highs/lows to identify trend direction

🔺

Chart Patterns

Triangles, flags, head & shoulders

Popular Technical Indicators

Moving Averages (MA)

Smooth out price data to identify trend direction

Relative Strength Index (RSI)

Measures overbought/oversold conditions (0-100 scale)

MACD (Moving Average Convergence Divergence)

Shows relationship between two moving averages

Bollinger Bands

Volatility bands around moving average

Trading Concepts (Educational)

Momentum Trading

Educational Concept: Momentum trading involves studying stocks showing strong directional movement. This concept is based on the idea of trend continuation for educational understanding.

Mean Reversion

Educational Concept: Mean reversion theory suggests that prices tend to return to their average over time. This is a statistical concept used for educational study of market behavior.

Breakout Trading

Educational Concept: Breakout analysis studies price movements through key support or resistance levels. This concept helps understand how markets react to technical levels for educational purposes.

Educational Note

Disclaimer: These are educational concepts only. Always consult SEBI registered advisors before making investment decisions. Historical analysis is for learning purposes and does not guarantee future results.

Risk Management

Risk Management is Critical

Poor risk management is the #1 reason traders fail. Protecting your capital is more important than making profits.

Key Risk Management Rules

  1. Never risk more than 1-2% per trade: This ensures you can survive losing streaks
  2. Set stop losses: Predefined exit point to limit losses
  3. Use position sizing: Calculate trade size based on your risk tolerance
  4. Diversify: Don't put all your money in one stock or sector
  5. Keep a trading journal: Track what works and what doesn't

Position Sizing Formula

Position Size = (Account Risk ÷ (Entry Price - Stop Loss)) × Account Balance

Example: ₹10,000 account, 2% risk (₹200), Entry at ₹100, Stop at ₹95
Position Size = ₹200 ÷ ₹5 = 40 shares maximum

Trading Psychology

Trading success is 80% psychology and 20% strategy. Understanding and controlling your emotions is crucial for consistent profitability.

Common Psychological Traps

Fear of Missing Out (FOMO)

Entering trades late due to fear of missing profits

Revenge Trading

Trying to recover losses with increasingly risky trades

Overconfidence

Taking excessive risks after a few winning trades

Developing Mental Discipline

  • Stick to your trading plan regardless of emotions
  • Accept that losses are part of trading
  • Focus on process, not individual trade outcomes
  • Take breaks during losing streaks
  • Practice mindfulness and stress management

Essential Trading Tools

Trading Platforms

Zerodha Kite

Popular Indian platform with advanced charting

TradingView

Professional charting and analysis tools

Market Data Sources

  • NSE/BSE official websites for real-time data
  • Economic calendars for news and events
  • Sector rotation tracking tools
  • FII/DII activity monitoring

Start Your Trading Journey

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