The two most common ways of earning money are by working for someone (salary) or working for yourself (business). Both require significant time to learn skills, upfront money investment, and efforts to grow wealth.
If you are stuck in a 9-to-5 job then you will not get sufficient time to explore any other activity to generate additional income. Your wealth would be limited to what you can save from your salary.
If you want to start a business then your investment would be at a huge risk in case your business fails (like I lost Rs. 20,00,000 in my first real estate business).
I love the third way to grow wealth, that is investing money in someone else’s business – through investing in the stock market.
Making money from stock markets requires just a few things
- Initial investment (can be as little as Rs. 10,000)
- An internet connection
- A trading account
- The right investment knowledge.
If you don’t have trading account, then check my list of best trading account in India
If you have these things, the money-making opportunities can be limitless.
To start stock trading, you will need to open a trading account with a broker. I would recommend that you open your account with a discount-broker as their brokerage charges are very low.
Once you open an account, you will get your account credentials from the broker which you can use to log in on their desktop or mobile app.
You will need to add funds in your trading account – that’s called ‘margin money’. You can buy stocks worth Rs. 50,000 with your Rs. 10,000 ‘margin money’ if your stockbroker is providing you 5x leverage (read more about leverage in the next section).
Capital Requirement to Earn daily 1000 from stock market
The more capital you invest, the easier it will be to make Rs. 1000 daily. Ideally, you should start with a capital of Rs. 50,000 for this return. It is possible to start with less margin money but then you will need to devote more time to get winning trades.
Let’s try to understand with an example –
For intraday trading, the broker will give you ‘leverage’. Leverage means that you can trade for a higher value than the money that you have in your trading account. A broker will give different leverage for different stocks.
Now, assume you have a capital of Rs. 20,000 and you decide to trade ICICI Bank stock intraday. If the leverage provided by the broker for this stock is 5x, you will be able to buy shares worth of 20,000 * 5 = Rs. 1,00,000.
If the stock is trading at Rs. 250, you will be able to buy 400 shares (equal to Rs. 1,00,000) even if you have only Rs. 20,000 in your trading account.
If the stock moves up by Rs. 5 then you can sell your 400 shares at a total value of 1,02,000 (400*255). You will make a profit of Rs. 2,000 within a single day with your investment of Rs. 20,000.
However, if you had traded with INR 50,000 you would be able to buy 50000*5/250= 1000 shares. In this case, even a 2 rupees movement in the stock will be enough to earn a net profit of Rs. 2000. In case the stock moves up Rs. 5 then you would end up making a profit of Rs. 5000.
That’s the benefit of starting with little more margin money so that you can capture more profit even when the stock moves up little.
You will need to spend at least one hour to plan your trades daily, which will involve
- Picking the right stock
- Studying the chart
- Identifying the entry/exit levels
- Deciding on your strategy
Once you enter a trade, you won’t necessarily have to monitor your trades throughout trading hours if you strictly follow your trading plan and just enter your target and stop-loss orders.
I will explain the whole process with real examples throughout this article.
If you pick the right stock and execute the right strategy then you can make profits even when the stock is going down. (That’s called shorting stocks, details later)