What are shares?
It is a means to owning a business.
The definition of ‘Securities’ under the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as stocks, bonds, shares or other securities of a similar nature in or of any incorporated company or corporate entity, government securities, derivatives of securities, shares of collective investment institutions, interests and rights on securities, receipts of securities or any other instruments so declared by the Central Government.
What is stock trading?
Stock trading refers to the buying and selling of company shares, or any derivative products based on company shares, for the purpose of making a profit.
Prerequisites for stock trading
• We need to have a DP account (PARTICIPANT DEPOSITORY).
• We need to have a business account
• And of course money
How does trading happen?
Companies are listed on popular stock exchanges like NSE, BSE
Interested traders using the terminal provided by their brokers trade those shares.
Online trading participants
• Inverter- Participate through the brokerage website using the internet and computer.
• Brokers- they contact each other through trading terminals and also find who is interested in buying or selling shares.
• Bag- It facilitates transactions through its servers. The most dominant stock exchange in India are NSE and BSE
• Company Registrar-It is a government body that keeps records of all shareholders and updates the database whenever ownership changes.
• Depositaries- Includes depositary participants who store shares in electronic format.
• SEBI (Securities Exchange Board of India)- SEBI is a government body that regulates financial markets and examines investor complaints against companies.
types of trade
intraday trading
delivery-based trading
intraday trading
Intraday trading includes the buying and selling of shares within the same trading day. Stocks purchased in this type of trading are not purchased with the intention of investing, but rather for the purpose of making a profit by analyzing the movement of stock indices.
delivery-based trading
Delivery-based trading means buying shares and holding them for a certain period of time is called delivery-based trading.
In this method, you must make your purchase request through your broker and pay the current share price. Once your request is executed, the shares you have purchased are deposited into your DP account. In this process, you must pay the full amount of the stock price. Once the shares are deposited into your account, you can sell or hold them for as long as you like.
Delivery-based trading in the cash segment is the simplest form of trading and the risk is comparatively lower.
The biggest advantage of delivery based trading is that you do not have any time limit to sell the shares. But the downside of delivery-based trading is that you have to pay the full price of the stock and brokerage is higher than other forms of investment.