Share trading

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RAMESH (Querist)
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15 July 2013 dear experts i want to know n do share trading plz suggest any procedure and how can i become expert in that .
thank you in advance

CA Pooja Agarwal

CA Pooja Agarwal (Expert)
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15 July 2013 there are some mock trading sites such as rediffmoney..u may start with those..learn about stock market through business channels, journals, business magazines.

after getting enough knowledge open a trading account with any service provider

Rajat Poddar

Rajat Poddar (Expert)
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15 July 2013 You basically need to do three things before starting share trading in India. As a first step, open a demat account that would entitle you to trade in stocks. Get a trading account with a registered broker who is associated with a stock exchange, the NSE or the BSE. Even though there are many stock exchanges, the National and Bombay stock exchange are the major places where stocks are generally traded. Once you opened a demat account you are all set to trade Indian stocks/shares online.

Depending on your wish, you can opt for any of them for trading. Opening a demat account is very simple as the shares that were held in paper a decade or more ago, are now digitalized. It is like a bank account where, instead of cash, there are shares. The entire process is electronic and you can find out your holdings at the click of a mouse. For trading in shares, you need to open demat or a dematerialized account to start with. You can easily open a demat account with a bank after filling out the required forms that need an identity and address proof.

For opening a demat account, you will be charged according to the usual norms of banks. Charges can differ from bank to bank as there are annual charges for maintenance of the demat account. There are also some periodic charges that you will have to pay banks for maintaining a demat account with them. There are service charges also which are required to be paid for buying or selling a share. Even though the charges are similar, they may vary from one service provider to the other.

Trading and bank account

Charges are also specified by the securities and exchange control board or SEBI as it is popularly known in India. As soon as you open the demat account and the trading and bank account, you can start trading. You can buy and sell shares online by logging on to the broker’s site which could also be your banker. There are many bankers in India through which you can trade in shares.

Margin money

You have to keep margin money and each broker has its own policy regarding the leverage they would allow. Your best bet would be to register with a broker where you can extract maximum leverage. If you can trade in higher volumes, you can keep your risk levels to the minimum. Even a fractional increase in price can offer chances of squaring up. After a small appreciation in stock price you can sell off and net a cool profit which would be reasonably good.

The sales proceeds will be credited to your bank account and in the event of losses, the money would be deducted from your balance or the margin money. When you buy shares, your demat account will swell and after selling, the demat account will reflect the shares held by you.

Share trading on the internet has become very common in India these days and many investors are wary of keeping money in the bank. Earlier, Indians had very few options apart from the interests they managed to earn on the fixed deposits with banks.

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Rajat Poddar

Rajat Poddar (Expert)
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15 July 2013 TRADING TIPS
While one can get many trading tips, their execution is important. Derek Zelek, master instructor at Online Trading Academy, says, "It's a battle of emotions. Trading is simple, but not easy. You have to be disciplined."

The importance of discipline in share trading cannot be obverstressed. That is because in most cases, when people are making money, greed makes them wait for more, and so they don't book profits. When prices fall, fear makes them sell fast. These situations can be avoided if they know when to book profit/loss.

If losses are not a deterrent and the market's roller-coaster movements give you a high, here are a few habits and skills that can help you stay on the right track. These are useful for day traders as well as positional traders.

Discipline: The key to success is a stop-loss order. Stop loss helps a trader sell a stock when it slides to a certain price. Suppose you buy shares of company A at Rs 100 and set a stop loss at Rs 95. When the price falls to Rs 95, the shares will be sold automatically. This means you have limited your loss to Rs 5. While entering a trade, you should be clear about how much loss you are willing to accept.

Skill: Trading is a skill, says Derek. "You have to learn what not to do along with what you should do. You should also know how to spot amateurs and trap them and how to take positions. Also, you should be quick to get in and very quick to get out," he says. A lot of amateurs in the market buy at a wrong point. A skilled trader identifies such people and takes an opposite position to trap them.

Planning: One should identify a few stocks and focus on them.

Minimum capital: Only those with a capital of at least Rs 2 lakh can trade for a meaningful gain. However, this capital should not be borrowed and should not be part of your core savings. People can also trade with less, but volumes are important. So, a certain minimum capital is a must.

Stock volumes: A stock should have enough volumes for it to be tradable. According to Zelek, it should have a minimum daily average volume of 500,000 shares. For those just starting, trading Nifty-50 stocks is a good idea, he says.

Price range: What should you do with a share which has high volumes but not much price movement? You should prefer shares with a minimum price range of Rs 10. This means the average difference between a stock's intra-day high and intra-day low should be at least Rs 10.