Tradebulls Online Share Trading

Online Share Trading Basics: How Trading in Online Share Market Works

Online Share Trading Basics: How Trading in Online Share Market Works

The NSE and the BSE operate on the price time price priority logic. When you place a buy order or a sell order for shares, it will get executed at the best available price. So, if you are buying shares it will get executed at the lowest available price and if you are selling it will get executed at the highest available price. Share trading is not just about price but also volumes. The volumes of a share refer to the total number of shares traded. The volumes can be assessed either in terms of the number of shares traded or the value of shares traded. 1 buy + 1 sell are equal to volume of 1 share.

What you need to know about share trading

  • The share trading is done based on the price and volumes of a stock that is visible on the screen. If the price and volumes are suitable, then you can place an order. Once the order is placed, the system will execute the order based on the price and volumes available. The system takes the effort to execute the order at the best possible price.
  • Once the order is placed and the execution is completed then it is called a trade. In share trading you can either be a buyer or a seller. When you buy shares, you have to pay money for the purchase and you will get shares in your demat account. When you sell shares, the shares will go out of your demat account and funds will come into your bank account.
  • It is also possible to trade shares intraday. That means you can buy the shares in the morning and sell it before the end of the day. You can also sell the shares in the morning and buy it back before the end of the day. An intraday trade has no impact on demat account as there is no delivery. The profits and losses get debited or credited to your trading account...
  • You can trade in shares, futures and options on the share markets. You can also trade currencies but we will leave that aside for the time being. Futures and options are derivative contracts and they do not impact your demat account in any way. They are just contracts to take long or short positions in the market. They are also used for protecting your risk.
  • Share trading can be done for the short term or for the long term. When you trade within a single day, it is called intraday trading. You can also trade for a few days or weeks as a short term trader. Those who buy shares for a longer period of time are called investors. These investors typically hold shares for many years.

What are the risks in share trading?

Shares are, by default, risky products as they are impacted by a variety of factors both macro factors and micro factors. That is why share trading is so complex.

  • Share trading is largely dependent on the performance of the nation’s economy, the industry in which the company operates and the specific performance of the company. It is also dependent on investor sentiments like fear, greed etc.
  • There is a major execution risk in share trading. For example, you may punch in the wrong quantity or the wrong price and that may result in loss. You may end up selling shares you do not own ending in auction losses. Alternatively, you may buy shares without having the funds and that may result in losses. Execution risk is a key risk in share trading.
  • Market volatility is perhaps the biggest risk you face in share trading. Volatility measures how much the stock prices fluctuates and that is a risk because it implies that your stop loss will get initiated. Also share trading is best done in predictable markets and volatility increases the risk and makes the market less predictable.


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