You can just walk into a supermarket and choose what you want from variety of products. Stock trading isn’t exactly the same. Stock market investment looks like a golden goose from far, but it comes with its own set of risks. But if you get involved in this smartly, you will surely reap profits. Gold and shares have always been a sought-after investment area for Indians.
If you are just entering this treacherous world, the main question in your mind would be –
“Where do I begin?”
You might choose to ask your friends and relatives and everyone would give you different opinions. Even those who have never invested in shares will start pouring pieces of advices on you. If you search on the internet, you might find a few tips and tricks but these at times are very risky.
Here is a guide to help you get started with stock trading.
A permanent account number is a primary requirement for doing any financial transaction in our country. This 10-digit unique number is assigned to every individual by the tax authorities for assessing tax liabilities. To be able to invest in shares, the first thing you will need is a PAN card.
Find a Broker
Like we said, stock trading isn’t like buying stuff from a supermarket. You can’t simply go to a stock exchange and ask to buy or sell stocks. Authorised people, called as brokers, sell and buy on the market. These individuals, companies or even online agencies are registered by the Securities and Exchanges Board of India and are reliable people who are licensed to trade. Finding a right broker is very important for starting your journey in trading.
Demat and Trading account
After getting a pan card and a broker, the next step is to get a Demat and Trading account. Demat account holds stocks or shares in your name and eradicates the need to store shares in a physical state. All the selling and buying happens through the brokers, while the shares are stored in your Demat account.
Trading account is an intermediary which facilitates the buying and selling. The buying and selling of shares requires a trading account. So, in short, you Demat account shows the number of shares you hold, while your Trading account reflects the buying and selling happening in your account.
If you approach a broker, he will take care of all this and open a Demat account for you.
NSDL, National Securities Depository Limited and CDSL, Central Depository Services Limited are the two depositories in India. They have agents in the form of depository participants who are responsible for providing you with an account to store the shares you hold. These hold the shares you buy and release the ones you sell. A broker will help you register with one.
Unique Identification Number
If you want to go all out in the share market and if you wish you invest more than Rs. 1,00,000 at a single time, then you will need a UIN.
Buying and Selling
The buying and selling takes place through two exchanges: Bombay Stock Exchange(BSE) and NSE (National Stock Exchange) Usually there is a slight price difference between both the exchanges and hence you need to mention the exchange to your broker.
Let us see an example to understand how the buying and selling actually happens.
You need to start by telling you broker about which share you wish to buy in what quantity. If you wish to invest in SBI, by buying 20 shares at a price of Rs.1000, you will inform your broker about the same. After placing the order, online or offline, the broker processes your order when that price is reached. Selling of stocks is done in the same way. The orders remain valid only for a certain time and if the buy or sell price is not reached, your order will get cancelled.
Stock trading is a dangerous place and always use your common sense before making any decisions. Don’t make mistakes like blindly following “Market Analysts” in fancy suits or by borrowing money to invest which might lead you into a debt trap. Don’t blindly follow any trends and observe a company’s long-term stability before making any big commitment.