How to Invest/Trade?
# 1. What do you need ?
What do you need is - trading, savings & demat account. When an individual want to invest in securities markets he should have a trading account which allows him to buy or sell the stocks in the securities markets. To hold securities in the dematerialized format we need to have a demat account. Both the trading account & demat account are linked to your savings account so that whenever you buy shares the money will be debited from your saving accounts and whenever you sell shares money will be credited to your saving accounts. Compare trading account to a bank account and a demat account to a virtual account that holds the shares you bought in electronic format
What do you need is - trading, savings & demat account. When an individual want to invest in securities markets he should have a trading account which allows him to buy or sell the stocks in the securities markets. To hold securities in the dematerialized format we need to have a demat account. Both the trading account & demat account are linked to your savings account so that whenever you buy shares the money will be debited from your saving accounts and whenever you sell shares money will be credited to your saving accounts
# 2. Start trading now!
Once you have a trading & demat account you can carry out buy or sell transaction into stocks through online trading portal of your broker. Through this online trading portal you can make your own investments. There is call & trade facility also available where you can call your broker and ask him to buy/sell shares for you through your trading account.
# 3. What to look at before buying/selling?
Bid price is the best price the buyer is willing to pay. It is the price you should know when you have to sell a stock. Bid is the price at which there is a ready buyer for the stock, which you intend to sell. Ask price is the price which you should know when you are buying a stock. i.e., this is the price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted “Ask’ price.
# 4. What happens when you place an order?
When a buy order is placed
a. The funds are allocated from bank account to trading account
b. The buy order is placed and executed once a buy and sell matching trade is received
c. The trade is confirmed
d. Shares get credited to demat account in 2 working days
When a sell order is placed
a. The shares are allocated from demat account to trading account
b. The sell order is placed and executed once a buy and sell matching trade is received
c. The trade is confirmed
d. Amount get credited to bank account in 2 working days
# 5. What happens after you buy/sell?
Supposing your friend agrees to buy a shirt for you from a shop, you will have to pay him for it eventually. Similarly, after you have bought or sold shares through your broker, the trade has to be settled. Meaning, the buyer has to receive his shares and the seller has to receive his money. Settlement is the process whereby payment is made by the buyers, and shares are delivered by the sellers. In India stock markets, we have adopted the T+2 settlements cycle.
This means that a transaction conducted on Day 1 has to be settled on the Day 1 + 2 working days. This is when funds are paid and securities are transferred. Thus, 'T+2' here, refers to Today + 2 working days. Saturdays and Sundays are not considered as working days. So, if you enter into a transaction on Friday, the trade will be settled not on Sunday, but on Tuesday. Even bank and exchange holidays are excluded.
# 6. What to keep in mind while placing a trade?
Reports contain the price at which to buy the stock and the target price, thus indicating the potential upside. Thus investment decisions have to be made keeping in mind the target price and the potential upside that particular stock is expected to deliver over a specified period of time.
On the other hand there are stop loss targets these are the targets on the lower end. Whenever an investor feels he wants to sell a stock and if he doesn’t want to suffer more losses beyond a certain price that lower limit price is the stop loss price.
# 7. Types of Order – Market and Limit
When an order, whether a buy or sell is placed, there are two options – Place the order at Market or Limit. Market orders provide instruction to execute as quickly as possible a transaction at the present or market price. Conversely, a limit order provides instruction to only execute an order at a particular price.
- Having a 3-in-1 account helps investors and traders to execute trades quickly as the funds get debited from and credited to the account directly.
- Having a target price can help in getting the desired profits and having a stop loss can avoid undesired loss.
Next Course of action:
- Check our Demo center where you will be able to get an understanding of the various Axis Direct product offerings, online services and much more
- A thorough analysis of company, industry and economy goes behind our stock ideas for you. With these picks, you may earn superior returns over a medium to long term period.