Tradebulls Investment Wiki

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.

Delivery Trade

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.

Intraday Trade

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 works.

Stop Loss

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.

Margin Trading

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.

Auction

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.

Order book

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.

Trade book

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 price.

Mark-to-Market Margin

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.

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