Basics of Stock Trading in Share Market
Stock trading is all about buying and selling stocks in the stock market. As much
it is a science, it is also an art. One needs to understand the stock market basics,
especially from the point of view of stock markets for beginners. Online stock trading
is all about learning how to invest in stock markets for beginners. Let us learn
how to trade stock from the basics.
When you buy or sell for delivery of shares it is called delivery trade. When you
buy for delivery you need to pay the full amount of the trade on T+1, ideally before
11 am. When you sell for delivery you need to give a Debit Instruction Slip (DIS)
for debiting the shares to your demat account.
An intraday trade is all about buying and selling on the same day. You can buy in
the morning and sell back on the same day. Alternatively, you can sell in the morning
and buy it back the same day. Such intraday trades are netted out and only the profits
or losses are adjusted to your trading account. It does not result in any delivery
Demat; trading account and banking are linked in a seamless loop
Your trading activity is a combination of your purchases and your sale. However,
trading is not just about trades but also payments and custody of shares. This is
how it works. When you buy shares in the trading account, the account has to be
pre-funded or you have to pay from your bank account by T+1. Then on T+2 day the
shares get credited to your demat account. When you sell shares, then the demat
account gets debited on T+1 day to the extent of shares sold and the net amount
(after costs) gets credited to your bank account on T+2 day. That is how the relationship
When you trade you need to define the maximum loss that you are willing to take.
Normally, your stop loss is below the buy price or above the selling price. Stop
losses are a protection against unlimited losses and are placed around the supports
and resistance levels.
In margin trading you do not put the entire money upfront. Instead you only pay
a small margin and the broker allows you to take a position that is a multiple of
your margin. Such trades have to necessarily be intraday trades. If you do not close
the trade on your own then the broker will typically close out the trades 15 minutes
before the end of the trading session.
When you sell shares for delivery you should be having the shares in your demat
account. If you sell shares without having delivery or if you do not give the DIS
on time then it can result in the shares going into auction. The auction losses
are debited to the trader’s account.
An order book is where all your cash, futures and options orders are seen. They
appear in your order book irrespective of whether the order is executed or not.
When an order is executed fully or partially, the actual executed trade can be seen
in the trade book. It is a record of all your executed transactions.
Good-Till-Day (GTD) Order
A GTD order is valid till end of trade on the day of placement. If the order is
not executed till the end of the day, it is automatically cancelled.
Immediate or Cancel (IOC) Order
An IOC order is placed in such a way that if the order is not executed immediately
on placement, then the system automatically cancels it.
Market Orders and Limit Orders
A market order is placed to get executed in the market at the best available price,
in case of buying or in case of selling. A limit order defines the best price to
execute. The system will only execute the order at the price or better than the
When you buy futures or sell options there is an initial margin that you pay. But
if the price movement is against you then the exchange also imposes MTM margins
which will be payable by you.
Fundamental Analysis and Technical Analysis
These are methods to research stocks. Fundamental analysis looks at the income statement,
balance sheet and cash flows of the company and arrives at a stock valuation. Technical
analysis looks at charts, resistances and supports to identify levels to trade.