HOW TO TRADE IN INDIAN SHARE MARKET?
Wondering how to trade in the stock market? No worries Here is some basic information one needs to know before you can start share trading in the Indian stock market successfully.
In order to embark on your share trading journey one needs to open a Demat account.
Yes, the Demat account has become the necessary thing in case you want to invest in the stock market.
It makes the share trading procedure hassle-free and convenient. check Best Trading app in India.
A Demat account will act as the common repository that allows you to store the shares you have bought, whereas trading facilitates the actual buying and selling.
Here is some basic information you should know before you can start trading with shares.
Stay tuned with us to learn about how to deal in the stock market?
So, without any further ado let’s get started!
The Process of trading
When you buy shares using your trading account, money is transferred out of your bank account, and the share is transferred into the Demat account.
Similarly, when you sell a share, it is transferred out of your Demat account into the share market.
The money following from the transaction will be made available in the bank accounts.
How to do trading in Share Market?
Choosing an online trading account
To begin trading in the stock market, an investor requires registering for a trading account and a Demat account, which needs to be linked to the investor’s bank account for the purpose of online money transfer.
This is a crucial step if you want to learn stock trading. This will recognize you to the interface and give you accessibility to the trading tools as well.
Before you open both the account, it is pertinent that you should gauge the credibility of the broking firm.
In addition, the trading account will allow you to make an online investment in mutual funds, equity shares, Upcoming IPOs, etc.
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Educate yourself
Investors have years to develop and hone their skills. Strategies applied twenty years ago will still be applied today.
It is important if you are into stock trading then it is must one should educate themselves about every aspect of How to start share trading?
Investors can read stock trading books as Books provides a wealth of information and are inexpensive. There are many Indian stock market websites that will give you fair knowledge regarding the stock markets.
Also, you can read investment articles that are published every now and then on the internet.
Being an investor you can find a mentor who holds the fundamental understanding of the stock market and guide you as well.
Forums can be a great source of questions and answers.
Learning about the great investors from the past is a great idea to hone your investment skills.
When you learn and imbibe the teachings of the great investors from the past you will gain inspiration, perspective, and appreciation and thus, can be a smart investor.
Practice with an online stock simulator
Using an online stock simulator is a great thought to practice your skills at zero risks. By playing virtual stock market games, you can enhance your knowledge of investing strategies.
Most of the online stock market games are synchronized with the market indices and stock values, thus giving you a real experience of trading in stocks using virtual money.
This assists in understanding the working of the stock markets without having loose on stocks.
Choose the low risk and high reward strategy
So I do not want to barrage you with millions of quotes only the one that is really inspiring
“Never invest in a business you cannot understand.”
Yes, risk comes from the business you don’t’ understand.
Beginners confuse higher risk with higher profits that’s why they often do more damage to their share trading account. It is of utmost importance to make the right investment decision through your trading strategies.
Make a plan
If you fail to plan you will fail in the end. Every successful trading requires intelligence and planning. It is required to have a strategy for investment and trading in the stock markets.
You can schedule your orders to sell and buy, depending on the cash limits and exposure set by your planned strategy.
Find a mentor
Do you know every successful investor have had a mentor at some point of time in their investment journey
When you are just beginner in the investment world and have just learned stock trading. It is very important that you find a person who has a fair knowledge of stock trading and can guide you as well with the basics and working of stock trading.
The person with experience in this field can guide you through your journey.
Your mentor can help you create a learning path, as well as keep you inspired through the ups and downs of the market.
Online in-person courses
If you are a beginner who is seeking to hone their skills in stock trading.
There are courses that cover the topics for individuals and investors at all the stages of their stockbroker journey.
You can also opt for a stockbroking course by NSE India.
Share Market basics
As an Indian investor, the two trade market that you can trade-in
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
The two depositories with which all the depositories participants are registered are
- National Security Exchange LTD (NSDL)
- Central Depository Services LTD (CDSL)
What are the types of trading?
Trading is one of the methods of how to invest money in the share market.
It is stated as an active form of buying and selling of securities with a purpose to fetch profits.
So, let’s come to the point what are the two types of trading?
Intraday Trading– In Intraday trading, you must square off all the positions before the market closes. For intraday trading, you may avail of the use of the margins, which is the funding provided by the broker to expand your exposure in the stock market.
It allows you to purchase/sell additional stocks that would otherwise require you a greater amount of funds.
Delivery Trading-
It involves buying the stock and holding them for more than one day, thus taking their delivery.
It does not involve the use of the margin, hence you must possess the funds for your share market investment. it is a more secure method of investing in the stock market.
What is a Bull Market?
You must have heard this word bull mean. Well, what does that mean, you must be wondering at the time you hear it. So, Bull market is a condition where there is a general trend of growth throughout the market.
A substantial rise in the stock prices is seen during the bull market.
A substantial decline is observed before and after this period.
Between the periods from April 2003 to January 2008, a major bull market trend was observed for about five years in Bombay Stock Exchange Index (BSE SENSEX) as it increased from 2,900 points to 21,000 points.
What is Bear Market?
A bear market is a market condition where there is a general trend of decline throughout the market.
A considerable decline in stock prices is seen during the bull market.
Long position and short position
An investor is said to be in a long position if he/she has bought the shares and owns them.
On the other hand, if investors owe these stocks to some other entity but do not owe them, he/she is said to have a short position.
For example, if an investor has bought 500 shares of Company X, then he/she is said to be 500 shares long. This takes into consideration that the investor has paid the full amount for these shares.
However, if the investor shares 500 shares of Company X without actually owning them, he/she is said to be 500 shares short. This often happens when an investor borrows shares into his margin account from the brokerage firm in order to make the delivery.
This investor now owes 500 shares and must purchase these shares in the market to make a delivery at settlement.
What are Electronic Trading and floor trading?
Earlier the procedure of trading was a long and tedious task before the electronic trading came into the scene.
Investors call the broker to place an order. The broker calls the order clerk who then relays the order to the broker clerk.
The floor broker executes the order and transfers it to the order clerk who thereon forwards it to the broker.
At last, the broker will give you a confirmation along with the fill of your order
With the emergence of electronic trading, the entire method of purchasing a share can be executed with a few seconds as opposed to the longer couple minute’s time required with the traditional floor or pit trading method.
Along with time-saving, the investor is required to pay much lower brokerage cost when buying shares from an electronic platform.
Clearly, the embarking of the electronic trading platform has led to the sheer decline in the number of floor brokers.
Auction market and dealer market
An auction market is where the prices are dependent upon the lowest price a seller is willing to accept for their product/security.
The seller post competitive offers and the buyers post competitive bids.
The matching bids and offers are interlinked and the transaction is performed.
Example: There are 3 sellers willing to sell the shares of Company X at Rs. 1200, Rs. 1250, and Rs. 1300. At the same time, there are 3 buyers willing to buy the shares of Company X at Rs. 1400, Rs. 1350, and Rs. 1300. Thus, only the order of the buyer number 3 and seller number 3 will be able to get executed since they have both agreed upon the same buying and selling price.
A dealer market, on the other hand, where the dealers post their selling and buying price. The dealers in such a market are delegated as the “market makers”
They display their prices electronically, thus making the process transparent.
Example: Dealer A owns some stocks of Company X that he is planning off-load. Price quoted by other dealers is 1300/1400.
However, dealer A posts a price of 1250/1350. Here, investors willing to buy the shares of Company X will purchase it from dealer A since it is Rs. 50 cheaper than the price marked by other dealers
How much you should invest?
It all depends on your risk appetite that how much risk you can bear.
It is to be noted that your investment should not endanger your savings.
What should you base your decisions on?
Financial Analysis-it is used to make inferences about the future share price and overall health of the company using company reports, and non-financial information, such as industry comparison, and estimates for demand for growth of the company’s products
Technical Analysis
It utilizes historical values of share prices and volume charts to make predictions about future prices.
Using both types of analysis will help you to make smart decisions.
Know your rights
Before signing a contract with the broker, ensuring that is registered with SEBI.
Also, keep a check on its credentials. Make sure that you receive a statement of accounts for funds and securities settled every quarter and documented proofs of all deposits that you make.
Dear readers, I hope you find the above post on “how to do share trading” useful.
I hope you are now well versed in what is share trading in the share market.