How to do trading in the stock market ?
The stocks of a company are called shares. Trading in the stock market has its own highs and lows. The experienced one can earn lakhs in a day, whereas a naive person can lose lakhs in a day. So trading should be carried out wisely.
The process to be followed for trading in the stock market is:
• Understand the process: When one buys a share, the money is transferred from the trading account and the shares are deposited in the Demat Account. When one sells the shares, the shares are transferred from Demat account to the market and total money is transferred to the bank account.
• Select a broker: Choose a broker who is a registered member of the Securities and Exchange Board of India (SEBI). The broker should be alert, informed, decisive and provide accurate information about various investment options. A broker can be an agency, individual or firm. A commission fee is charged for buying and selling shares on the behalf of the client.
• Open a Demat account: The hired brokerage firm will help one to register for a Demat (dematerialised) account and a trading account. One cannot trade in stock markets without these two accounts. The Demat accounts electronically hold the securities bought from the stock market.
• Placing the order: After setting up a Demat account, one has to place an order. The selling and buying of securities are handled by brokers on the behalf of their investors. The order should specify the numbers of desired shares to be bought, price and time to be bought within. Different types of orders are limit order, best order, open order and stop order.
• Executing the order: NSE and BSE are two renowned exchanges in India which carry out the buying and selling of shares. A non-member cannot enter the stock exchange for trading. The broker executes the order to buy or sell shares, according to the instructions of the investor. There is a certain time period fixed to carry out the dealings.
• Contract note: The broker processes a record of the buying and selling of shares called contract note. This contains the name, number and price of the shares, date of execution and amount charged by the broker.
• Settlement: The settlement of the transaction is carried out by the broker on the investor’s behalf. It is of two types:
1. On Spot Settlement: The transaction is cleared on that day or the very next business day.
2. Forward Settlement: The transaction is made within the time mentioned or in the next 14 business days.
Trading becomes easy, once the workings of the stock market are clear to the investor.