How to Buy and Sell Shares in the Stock Market?
Buying and selling of shares is not just about research and identifying a stock.
It is also about actual execution of the trade. You must execute the trade in the
best possible manner and once that is completed then the follow up actions must
be taken like monitoring the position, tallying the position with your final contract
note etc. You can buy either online or offline.
Offline versus Online Buying of Shares
You can buy shares of a company either offline or through the online (internet)
mode. Offline buying of shares entails placing an order to buy shares over phone
or by going down to the branch of your broker. Online trading is all about using
the internet to place orders on stocks. You can either place such orders on your
laptop with an internet connection or even by downloading the app onto your smart
phone or your tablet. Online buying and selling of shares is a lot more convenient
and also a lot simpler giving control in the hands of the customer.
Process of Buying and Selling Shares
Opening your trading and demat account
If you already have a trading and demat account, then you can straight away go and
start buying the shares. In case, you do not have a trading and demat account, you
need to open a trading and demat account. SEBI rule do not permit you to buy and
sell shares without a trading and demat account. You also need to map a bank account
to the trading and demat account.
Placing an offline versus online order
You can buy and sell shares either offline or online. You need to decide which mode
you are more comfortable with. If you prefer to sit in the broker’s office or call
up your broker and trade then offline is the mode for you. If you are more comfortable
with the laptop or the mobile then online is the mode for you.
Deciding on the type of order to be placed
There are different types of orders and you need to figure out which order to place.
In a trending market a market order will work best whereas in a volatile market
a limit order will be a good choice. In case you don’t want to be seen on the screen
for too long then an Immediate or Cancel (IOC) order can work best. The whole purpose
of fine tuning your order placement is to ensure that you get the lowest possible
price when you are buying the stock and the highest possible price when you are
selling the stock.
Executing the order and monitoring it…
Once the order is placed, you need to track its status in the order book. The order
book consists of your executed and pending orders. It also contains all your orders
placed as identified with a unique order number. Once the order is executed, it
is moved to the trade book. The trade book will give you an idea of the price at
which the stock was purchased and the average price.
Monitoring your trades and doing the MIS checks
Buying and selling of shares does not end with placing a buy or sell order and ensuring
that it gets executed. You need to reconcile the trade summary with the contract
note in the evening to understand your actual break even cost. Then you need to
also verify your cash balance in the trading account with the ledger statement provided
by the broker. Lastly, you also need to maintain a tab of your profits and losses
made in equities and ensure that such figures are appropriately filed for tax returns.
You also need to ensure advance tax payments.
Two Tricks to Buying and Selling Shares in the Market
There are two things for you to remember when you buy or sell shares in the indian
stock markets and you can use them.
Trades can be converted
Say you bought a stock for delivery over the next 1 month and the stock touched
20% upper circuit on the same day. What do you do? You can convert that into an
intraday trade and book the profit of 20% and move out of the stock. Earning 20%
in a day is amazing and you can not only sell it intraday on the same day but also
next day using BTST or STBT.
Use hidden orders while buying or selling large quantities
The trading system allows you to place hidden orders with only 10% of the order
disclosed. For example, if you place an order to buy 10,000 shares and you don’t
want it to show up, then you can just disclose 1000 shares on the screen and the
remaining shares will continue to keep executing in the market even though the screen
will not show. This method is very useful if you are buying and selling shares in
large quantities and do not want it to be disclosed.