Muhurat Trading Strategies for Beginners: Smart Ways to Start Investing

Muhurat Trading during Diwali is an auspicious event stock market enthusiasts look forward to. Some make their first stock purchase, while others add a few shares to their existing portfolio. If you are planning to participate this year, take a moment to think about what you want from the session. Are you buying to hold for the long term or hoping to make a quick trade? Either way, having a plan helps.

Let us look at how you can prepare, choose stocks and build a Muhurat Trading Strategy that suits your goals.

What is Muhurat Trading and Why is it Special?

Every Diwali, the stock exchanges hold a special Muhurat Trading session. ‘Muhurat’ means an auspicious time, and there is a reason why a lot of people choose this day to make their first investment. Diwali marks the start of a new Samvat, or Hindu calendar year. It is often viewed as a time for a fresh start, be it a new venture, a new purchase or something you have been meaning to do for some time.

Investing in the stock market during Muhurat Trading is one way people like to mark that new beginning. However, buying a stock on this day does not guarantee that it will work in your favour. The usual market risks still apply.

How to Prepare for Muhurat Trading as a Beginner

The market can move quickly during Muhurat Trading. You might see a stock price rise suddenly and feel like you should buy it before it goes any higher. But rushing into a trade is rarely a good idea. Before the session begins, take some time to get these things in place.

-- Decide how much money you are comfortable putting into the market. Keep your household expenses and emergency savings separate, and do not feel that you have to invest the entire amount.

-- Be aware of the objective behind your purchase. Do you want to hold them for a few years, or are you looking at a short-term trade? Knowing this beforehand will help you decide which stocks to look at.

-- Do your research well in advance. It is much easier to stick to your plan when you know what you want to buy, rather than searching for stocks while the market is moving.

-- Check the Muhurat Trading timings announced by the stock exchanges. The session does not follow the usual market schedule. So, do not assume that regular trading hours will apply.

-- Check your trading account before Diwali. Make sure you can log in, your account is active, and you have enough funds to place an order without scrambling at the last minute.

5 Muhurat Trading Strategies for Beginners

You do not need to try and make several trades during this one session. In fact, a few sensible decisions can be more useful than buying stocks just to participate in muhurat trading. Here are five approaches worth considering.

1. Buy stocks you would be happy to hold after Diwali

Here is a simple way to look at it. Suppose the stock you buy does not give you returns in a few days. Would you still be comfortable holding it? If not, you may want to rethink the purchase. Do not buy a stock just because its share price is moving during the session.

2. Give the company's fundamentals a closer look

Some stocks get more attention than others during Muhurat Trading. However, this may not sustain post-session. So, it is better to make decisions based on the company's fundamentals. Take a look at what the business does, how its profits have been, and whether it has too much debt.

3. Avoid market orders; use limit orders

The session may see unusually volatile stock prices. This is where a limit order can be beneficial. It lets you determine the maximum price that you want to pay for a stock instead of buying at whatever price is available. Say place a limit order at ₹500. The order shall be executed only if the stock is available at ₹500 or less. That way, you would not end up paying more.

4. Avoid putting your entire budget into one company

You may really like a particular company, but putting all your money into its stock is still a risk. What if the company has a bad quarter? What if the share price falls because of some other uncertain event? Hence, spread the amount across two or three companies from different sectors. That way, if one stock has a difficult run, the rest of your investments are not tied to its performance.

5. Know when you want to sell

It is easy to think about buying a stock. But have you thought about when you will sell it? If you are looking for a short-term gain, decide when you would book a profit and when you would exit if the price falls. If you plan to hold the stock for years, think about what would make you change your mind about the company. Having this clarity before buying can save you from making decisions in the heat of the moment.

How to Choose Stocks as a Beginner for Muhurat Trading

When you are new to investing, it is better to start with companies you know something about. Think of businesses that you come across regularly. Do you understand how they make money? That is a good starting point.

Once you have a company in mind, spend some time looking at its financials. Are its sales and profits growing? Does it have a lot of debt? You do not need to analyse every number, but these basic checks can tell you whether the company is worth looking into further.

It is also worth looking at the management's track record, the stock's valuation and its trading volume. A good company can still be an expensive investment, so do not ignore the price you are paying. And if a stock has very low trading activity, you may find it harder to buy or sell at your preferred price.

Muhurat Trading Investment Strategies Based on your Risk Profile

The way you approach Muhurat Trading will also depend on the kind of investor you are. For example, a conservative investor may not be comfortable seeing large changes in stock prices. If that sounds like you, there is no need to chase stocks that are expected to grow quickly. You could look at well-established companies with a relatively steady business. Invest a smaller amount to begin with.

A moderate investor might take a few chances if there is some growth potential in the investment. Those investors might want a balance between the established and emerging companies.

Aggressive investors may be comfortable with larger price swings and more risk. They may be willing to explore companies with greater growth potential, but it is important to remember that their prices can fall sharply too.

How to Place your First Muhurat Trading Order

To place your first muhurat trading order, ensure you have a demat account and log in during the muhurat session, which is from 2:20 pm to 3:20 pm.

1. Log in to the trading platform.

2. Search for the company you want to buy.

3. Choose the order type. You can choose between a market order or limit order based on your strategy.

4. Enter the number of shares you want to buy.

5. Review the order details.

6. Confirm the order.

7. Check your order book to confirm the order has been executed.

Common Doubts About Muhurat Trading

If this is your first time participating in Muhurat Trading, you may have a few questions about how the session works. Let us answer some of them here.

-- Can anyone participate in Muhurat Trading?

Yes. Investors with an active trading account can participate, subject to the applicable exchange and broker rules. You do not have to be an experienced trader to place an order.

-- Can I buy and sell shares during the session?

You can place both buy and sell orders during the special session, subject to the trading segments and exchange rules. The usual settlement and other market rules continue to apply.

-- Is Muhurat Trading different from a regular trading day?

The main difference is that it is a short session held on Diwali. Stock exchanges follow different timings as compared to regular trading days. The basic process of placing buy and sell orders remains familiar.

-- Does buying shares during Muhurat Trading bring good returns?

The muhurat trading session is considered auspicious by many investors, but that does not influence a company's financial performance or guarantee that its share price will rise.

Common Muhurat Trading Mistakes Beginners Should Avoid

A little excitement is understandable, but try not to let it decide what you buy. These are a few mistakes worth watching out for.

• Following every stock tip - Your friend may have made money from a particular stock, but that does not mean it will work for you. Do your own research before placing an order.

• Looking for quick profits - The market may be optimistic around Muhurat Trading. But it is just one session. Do not enter the market assuming that every stock will rise or that you will make money by the end of the day.

• Ignoring charges - Brokerage and other applicable charges can affect your overall returns. If you do a lot of small trades, it has a greater impact. Check the charges before confirming your order.

• Confusing trading with investing - Before you buy, think about how long you want to hold the stock. Are you hoping to sell it in a day or two, or are you buying it because you believe in the company over the next few years? The answer will change how you approach the trade.

• Overlooking the stock price - Finding a good company is only half the job. You also need to look at what you are paying for its shares. A stock can belong to a strong business and still be overpriced. Take a moment to check its valuation before placing your order.

Start your Muhurat Trading Journey With a Clear Investment Plan

Muhurat Trading can be a meaningful way to begin your investment journey. But the occasion should not take priority over your financial goals. Decide what you want to achieve, research the companies you are considering and invest within your budget. A thoughtful decision matters more than making a trade just for the sake of it.