Introduction to share trading Part-I
Posted on October 16, 2009
Filed Under Business & Finance |
Today I am writing a post for people who are new to the share market, especially at share trading. However, I am not an expert in this but I am trading for the last 4-5 years. So whatever I will write in this, is completely based on my experience so far.
First of all, one should have a Demat Account ( Demat account allows you to buy, sell and transact shares without the endless paperwork and delays). Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, you need to open a Demat Account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. It shows you how much shares you have. This service is available with many banks as well some brokerage firms like ICICI Bank, HDFC Bank, Sharekhan, Indiabulls, many more. Once you have a Demat Account, you can start trading (buy/sell) of shares. With different providers you get different options to trade e.g. trading on phone or online.
In this post, I will discus trading in Equity. Equity generally consists of two type of trading, one is delivery and another is margin trading (also called intraday trading). For delivery, suppose I have to purchase 100 shares of Reliance Communication, which is currently quoted at around Rs. 230, so the total money we will have to pay is Rs. 23000. Once I have made the payment, the shares will be credited to my demat account. Now it depends upon me, when to sell. If we talk of margin trading (intraday trading), suppose we want to purchase the 100 shares of Reliance Communication, currently quoted at Rs. 230. Now this time however the total price will be Rs. 23000, but we don’t have to pay total amount, this time we have to pay some marginal amount (percentage amount) of the total. For every stock, there is a predefined margin. Let’s assume, for Reliance Communication, the margin percentage is 20%, so you have to pay only Rs. 4600. But in this case, the shares holding will be for that day only, i.e. you will have to sell it the same day. Now in this case suppose you sell it at Rs. 240, then you are at a profit of Rs. 1000. Wow!!!!!! That’s a great achievement, profit of Rs 1000 in a single day on investment of Rs. 4600. But don’t forget, at the same time if unfortunately you had to sell it at Rs. 225, then you will be at a loss of Rs. 500. So, intraday trading is advised only after a thorough understanding of the market and proper research.
I think the post is getting too long. In my next post under this category, I will put some information about F&O (futures & option) trading. Feel free to ask questions, and comment as well.
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please write more on this topic and try to continue writing from this post….awesome work…also suggest about some shares which can be purchased for long term benefit.
Sure Tarun, you’ll set get subsequent posts as a continuation of this one giving you all the essential nitty gritties of share trading.
is it neccesary to sell share same day in intratading?
If you talk of intratrading then you need to sell it same day, however if you want you can keep shares but by paying the total amount of share ( its called convert to delivery)….
ok,thnx for reply
waiting for another blog related to share….
will u plz tell me that what is the main diffrence between BSE nd NSE,if some company is listed in both exchange thn frm which SE(i.e BSE/NSE) we have to buy that 1.
[...] on October 27, 2009Filed Under Finance | Introduction to Share Trading Part-IIIn the previous part, I had discussed about the basics of Share Trading. I had covered “intraday” and [...]