basics of online stock market india basics of stock market indian

8/10/2019 Basics of Online Stock Market India Basics of Stock Market Indian

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Stock and stock market Stock market and its analysis

Important terms in stock market and stock trading

Learn stock trading and processes

Different methods of buying/selling of stocks

Different types of stock trading

Technical & Fundamental analysis of Indian Stock market

Information and guide on Online Stock trading

Investment in Long term trading in Indian Stock Market

Basics of Stock Market Indian

To learn more about how you can earn on the stock market, one has to understand how it works. A person want to buy/sell stocks in the stoc

market has to first place his/her order with a broker or can do themselves using online trading systems (this will be discussed later). When th

buy order of the stocks is communicated to the exchange [either NSE {National Stock Exchange} or BSE {Bombay Stock Exchange}]. Th

order stays in the queue of exchange's other orders and gets executed if the price of that stock comes to that value. The stocks purchased w

be sent to the you either in physical or demat format

Rolling Settlement Cycle: (RSC)

RSC means when you will get your stocks in your demat account or in physical form. In a rolling settlement, each trading day(T) is considere

as a trading period and trades executed during the trading day(T) are settled on a T+2 basis i.e. trading day plus two working days.

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by the Government of India in 1992 with its head office a

Mumbai. Its one of the function is helping the business in stock exchanges and any other securities markets.

Demat (short form of Dematerialization) is the process by which an investor can get stocks (also called as physical certificates) converted in

electronic form maintained in an account with the Depository Participant (DP).

DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DPs are li

agents of Depository.

Depository is an organization responsible to maintain investor's securities (securities can be stocks or any other form of investments) in th

electronic form. In India there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Deposito

Services India Ltd.)

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Stock and Stock market

Stock-

Stock is nothing is but the Ownership of the company divided into small pa

and each part is called as Stock. A person carrying a stock of a company hol

that part of ownership in that company.

A person holding maximum stocks has maximun ownership like directo

chairman etc.

Stock Market-

A Stock market is the place where buying and selling of stocks tak

place.Nowdays due to internet and advanced technology buying and selling

stocks takes place anywhere in india and also from foreign country, there is

need to be physical present in exchanges like NSE and BSE.

Stock market information and its analysisFinancial markets like NSE (National Stock Exchange) and BSE (Bombay Sto

Exchange) are countries economic barometer (a guide to economic growt

Stock markets like NSE and BSE enable trading of a company's stock.
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Investors wishing to open Demat account has to go DP and open the account.

Opening the Demat account is as simple as opening the bank account with any bank. As you need bank account to save your money, ma

cheque payments etc, likewise you need to open a demat account if you want to buy or sell stocks.

All stocks what you possess will show in your demat account.

So you don't have to possess any physical certificates. They are all held electronically in your demat account. As you buy and sell the stock

accordingly your stocks will get adjusted in your account.

Is a demat account a must?

The market regulator, the Securities and Exchange Board of India (SEBI), has made it compulsory to open the

demat account if you want to buy and sell stocks.

So a demat account is a must for trading and investing.

How to start to open a Demat account?

You have to approach a DP to open a Demat account. Most banks are DP participants so you may approach

them.

To have latest list of registered DP please visit websites www.nsdl.co.inand www.cdslindia.com.

A broker and a DP are two different people. A broker is a member of the stock exchange, who buys and sells

stocks on his behalf and also on behalf of his customers..

Following are the documents required to open Demat account.

When you approach any DP, you will be guided through the formalities of opening an account. The DP will ask to

provide some documents as proof of your identity and address.

Below is a list but you may not require all of them.

PAN card, Voter's ID, Passport, Ration card, Driver's license, Photo credit card

Employee ID card, IT returns, Electrici ty/ Landline phone bill etc.

Do you need any stocks to open a Demat account?

No. You need not need any stocks to open a demat account. A demat account can be opened with no balance

of stocks.

And there is no minimum balance to be maintained either. You can have a zero balance in your account.

How much it cost to open a Demat account?

The charges for account opening, annual account maintenance fees and transaction charges vary between

various DPs. To have latest charges please visit websites of www.nsdl.co.inand www.cdslindia.com

Finally-

After successfully opening the demat account, the DP will allot Beneficial Owner Identification Number, which

will be needed to mention for all your future transactions.

If you want to sell your stocks, you need to place an order with your broker and give a 'Delivery Instruction' toyour DP.

The DP will debit your account with the number of stocks sold. You will receive the payment from your broker.

If you want to buy stocks, inform your broker about your Depository Account Number, so that the stocks bought

are credited into your account.

Points to remember w hile opening online account

Make multiple enquiries and try get low brokerage trading and demat account.

Also discuss about the margin they provide for day trading.

Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer from your bank

account to trading account and visa versa. Some online share trading account has integrated savings account

which makes easy for you to transfer funds from your saving account to trading account.

Very important is about service they provide, the research calls, intraday or daily trading tips.

Also enquire about their services charges and any other hidden charges if any.

And also see how reliable and easy is to contact them in case i f any emergency. Emergency closing or

squaring off trades in case of any technical or other problems.

Important terms in stock market and in stock trading

Open- The first price at which the stock opens when market opens in the morning.

High- The stock price reached at the highest level in a day.

Low- The stock price reached the lowest level in a day.

Close- The stock price at which it remains after the end of market timings or the final price of the stock when the market c loses for a day.

Volume- Volume is nothing but quantity.

Bid - The Buying price is called as Bid price.

Offer- The selling price is called offer price.

Bid Quantity- The total number of stocks available for buying is called Bid Quantity.

Offer Quantity- The total number of stocks available for selling is called Offer Quantity.


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Learn stock trading and processes

Stock Trading -

Buying and Selling of stocks is called stock trading.

Mainly there are two ways of doing stock trading.

Online Stock Trading.

Offline Stock Trading.

Online Stock Trading -

Doing stock trading with help of computer, internet connection and with trading/demat account is called Online Stock Trading.

If you would like to do online stock trading then you should have a computer, internet connection and online trading account.

Details of Online stock trading has been given in next chapter.

Offline Stock Trading-

Doing stock trading with the help of broker or through phone is called Offline trading.

In other words trading will be done by another person on your behalf based on the instructions given by you, and then the other person can be

a broker.

The broker will do buying and selling of stocks on your behalf depending on the instructions given by you.

If you want to do offline stock trading then you need to open the demat account.

Details of Offline stock trading has been given in next chapter.

Different methods of buying/selling of stocksFollowing are the types of orders which are used for buying and selling of stocks.

Market Order- When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get

immediately executed at the current available price. In market order there is no need

to mention the price; the stocks will get executed at the best current available price. If you wish to buy or sellstocks at any specific price then market order is not suitable for you then you have to go for limit order. Market

order is for those who want to buy or sell immediately at the current available price.

Limit Order-

Its totally different to market order. In limit order the buying or selling price has to be mentioned and when the stock price comes to that price

then your order will get executed with the mentioned price by you. But here its not sure that the price will come to your limit order. In day

trading its risk because you have to close all your transactions before 3:30 PM and if in case price doesnt reach to your limit order then your

order will be open and then you have to go through (bare) the heavy penalties.

Importantly limit order and stop loss trigger price are used together.

Stop Loss Trigger Price-

Stop loss and trigger price are used to reduce the losses.

This is very important term especially if you are doing day trading (intraday).

Stop Loss as the name indicates this is used to reduce the loss.

Different types of stock tradingDay trading and Delivery trading are the two main types of stocks trading.

Day trading-

Buying and selling of stocks on daily basis is called day trading this is also called as Intra day trading. Whatever you buy today you have to

sell it today OR whatever you sell today you have to buy it today and very importantly during market hours that is 9.55 am to 3.30 pm (Indian

time).

Delivery Trading

In Delivery Trading, as the name say, you have to take the delivery of stocks and after getting these stocks in your demat account you can

sell them at anytime (or you can hold them till you want, there is no restriction). In delivery trading you need to have the amount required to

buy stock for example, if you want to buy 100 stocks of Reliance at price 500 than you must have (100*500) Rs. 5000 in your account; once

you purchased these stocks will get deposited in your demat account (say after basically, trading day and 2 additional days). Then you can

sell these stocks when the price of these stocks goes up or else you can sell whenever you want.

Please Note - First you have to buy and sell. You cant sell before buying in delivery trading while its possible in day trading.

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Buying and selling of stocks - Buy is also called as demand or bid and selling is also called as supply or offer.First selling and then

buying (this only happens in day trading) is called as shorting of stocks or short sell.

Stock Trading - Buying and Selling of stocks is called stock trading.

Transaction - One complete cycle of buying and selling of stocks is called One Transaction.

Squaring off - This term is used to complete one transaction. Means if you buy then have to sell (means square-off) and if you sell then you

have to buy (means square-off).

Limit Order - In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then your order wil

get executed with the mentioned price by you.

Market Order- When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get

immediately executed at the current available price.


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Technical and Fundamental analysis in Indian Stock Market

The fundamental and technical analysis are widely used for stock traders but use of these analysis differs

from traders to traders.

First of all lets see what these analysis means -

a) Fundamental Analysis -

The name itself indicates that this analysis is totally based on companies fundamentals. Fundamental

analysis is used for long term analysis and long term returns.

Following are the few fundamental terms used to forecast and analyze the companies future growth and

based on this analysis transaction of stocks will be done.

Companies expansion or planning in coming future.

Management processes and planning

Meeting of Board of directors

Declaration of yearly financial statements

Study of past performance of the company.

Study of quarterly, half yearly and annual reports.

Companies involvement in foreign investment/collaboration, polit ical or economic involvements, etc.

Depending on these factors and many others, fundamental analysts prepares certain stock market and

stock trading related terms which will be used to forcast the company growth and prospects. The terms l ike

Whether the stock prices are overvalued or under valued,

Working capital ratio,

Return on equity ratio, Debt equity ratio etc.

Based on these terms and other fundamentals, the analysts predict the movement of stock prices that is

either bullish or bearish in coming future.

Basically fundamental analysis is meant for long term investments and not for day trading or short term

investment. So traders planning to invest for long term in stock market then they must go for fundamental

analysis.

Always good fundamental companies give good results and returns for stock holders in long term.

b) Technical Analysis -

As fundamental analysis made for long term investments, likewise technical analysis is made for day traders

and short term traders. Technical analysis is nothing but study of charts, support and resistance levels,

technical indicators and other parameters which are useful to analyze the stock price movements in short

term or in day trading. There are several factors and terms in Technical analysis which will be discussed in

detail in further topics.

Information and guide on online stock trading

What is Online stock Trading ?

Trading with the help of computer having internet connection and online trading account is called Online Stock Trading. Basically people use

online stock trading who want to trade themselves.

Essential of Online Trading -

Online trading account - You have to open an online trading account with any of the bank or financial trading system like ICICIdirect.com,

5paisa.com, Stockkhan.com etc. Their will be nominal annual charges. These charges vary from bank to bank but should not be more than

Rs.1000 annually. A computer with internet connection or can do trading in internet cafe.

After successfully opening the online account you will receive the username and password with the help of which you can login in online

trading system and trade yourself.

The trading system executive (with whom you opened trading account) will help you initially about how to use the online trading system.

Once you get familiar with the system then you can trade yourself at your home or in the internet cafe.

Nowadays you can get internet enabled on your cell (which is called GPRS) whose speed will be sufficient to do trading and also the

charges of GPRS are very nominal.

Advantages of Online Trading

No need to depend on any broker or anybody else to place the order or to square off the order. In short you are the boss of yourself to do

trading of stocks.

Its reliable, convenient and you can take your own decisions yourself by actual selling or analyzing the market on the computer screen

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Investment in Short term, Mid term and Long term trading

Short Term Trading-

Stock trading done from one week to couple of months is called short term.Companies or sectors having some breaking news will be used for short term trading.

Mid term Trading-

Stock trading done from one month to couple of months, say s ix to eight months is called mid term t rading.

Companies announcements of quarterly results or some big foreign acquisitions will be used for mid term trading.

Long term trading-

Stock trading done form couple of months to couple of years is called long term trading.

Companies whose fundamentals are good and have good future plans then the stocks of these companies are

used for long term trading.

Generally traders having good capital go for long term trading.

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Following are terms to search more information

Search

stock exchange

stock market

stock markets

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stock market news

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instead of calling broker all the time and getting news about the market.

Its not possible or practical for a broker to update you about each and every news about the market or any news which will influence or

affect the stock market. Because he may be having many other customers like you and even if he updates you by that time the news have

been affected the concerned sector or stock. So if you are doing online trading yourself, then you may save yourself from big disaster. You will

get news and updates on various websites and also on your online trading system and most of the information will be free of cost.

Always remember stock market always get influences (or affected) by the appropriate news. So get updated or be in touch with news all the

time. This will benefit you always.

By doing online trading yourself, you can see and judge where market (or your stock) is heading by seeing different graphs online yourself,

which is not possible if youre trading through broker. Some online trading systems have graphs integrated in their system, so your job is to

ust add those graphs and check the status of current market (or stock) (graphs will be discussed later). And depending on your analysis you

can take s teps towards your successfully trading. (How to analyze graphs will be mentioned later).

All your transactions and related documents can be seen online and can also be downloaded to your PC without depending on your broker.You can also check the status of your amount on daily basis through you online trading system.

Disadvantages of Online Trading

In online trading system you may face problem of disconnection to internet due to which you will not be able to login to your online trading

system and hence you cant do trading yourself. At such critical times you have to call trading system executive and do trading or square off

your transactions.

If may face other problems such as electricity cut-off, PC problem etc during online trading then immediately you have to contact your

trading system executive and place orders or do trading.


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