Getting Started in Share Market Trading Things you should know
It is very interesting to invest in shares, though most of the people would like to start with small money.
First of all, you need to know a little bit in detail about the stock market, then about the shares and the mode of their trading. What are the risks involved and how to be smart in dealing with shares?
- Stock Market – It is the place where the shares of listed companies are bought and sold. In India, you have BSE and NSE as two big stock exchanges.
- Shares are bought and sold by you and me only through approved brokers.
- Approved brokers are mostly banks like the ICICI, HDFC, IDBI, UTI Bank, SHCI, are to name a few.
- First you need to open an account with a bank, that has the Demat account facility.
- Go to the respective bank and open a Savings account with deposit of around Rs. 10,000.
- Tell the bank that you want to deal in shares and ask them to open a Demat account. It will be done automatically after signing a few forms.
- A Demat account is nothing, but the account where the shares bought by you will be kept separately.
- Only you could operate that account online, through Internet.
- You could open the online facility offered by the ICICI, HDFC or ShareKhan or others and buy shares you wish and decide the quantity and the price.
- Here the bank will act as a broker. You online order for purchase would be carried out by the bank. They charge broker commission, much less compared to private brokers.
- It is very important for you to have enough balance to your credit in your savings account.
- As and when you buy on line, your Demat account will be credited with those shares. The money for the purchase will be automatically deducted from your account by the bank.
- You also have to keep looking for opportunities to sell the shares that you have already bought and kept in your Demat account.
- For buying and selling, it is necessary to familiarize which shares to be bought at what prices and sell them at what price.
- As and when you decide to sell (depending on the price quoted in the market) you could sell them through online trading system.
- The moment you sell your Demat account will be debited with the number of shares sold by you.
- Your account will be credited with the amount for which you have sold.
- Depending on the amount of profit earned, tax will also be deducted by the bank (TDS). The bank will give you a TDS certificate by the year end, i.e., March 31, of that year which you could attach with the return to justify the tax payment.
- When the shares could be bought or sold?
Always sell the shares when the price is up and buy when the price is down. Every body had to adapt to this formula.
- What profit should it give you?
You buy a share for a particular price. Take the amount as investment. Any bank will lend you at ten per cent interest. It will give you 24 per cent return if the share price rises in such a way. Do not wait for the market to crash and start searching for buyers for the price you quote.After selling, never look back and repent for what profit you have earned, had you delayed the sale. Be happy that it did not happen otherwise. This is the best way, to sell.
- If you want to buy, look for 52 week low, look for the peer companies, their price and compare it with the company you want to buy.Look for the prospectus, future plans and the profit the company ought to make in the next year. Take the perception or a change and buy.
- You cannot take profit in the buys. Losses do occur as long as you are at decent surplus for which you have no reason to be unhappy.
To trade in shares, you have to approach a broker However, since most stock exchange brokers deal in very high volumes, they generally do not entertain small investors. These brokers have a network of sub-brokers who provide them with orders.
The general investors should identify a sub-broker for regular trading in shares and place his order for purchase and sale through the sub-broker. The sub-broker will transmit the order to his broker who will then execute it .
SEBI has laid down certain Guidelines for Dealing with Brokers & Sub-brokers
Here are the DOs
- Deal only with SEBI-registered brokers/sub-brokers.
- Ensure that the broker/sub-broker has a valid SEBI registration certificate.
- Ensure that the broker/sub-broker is permitted to transact in the market.
- State clearly to the broker/sub-broker who will be placing orders on your behalf
- Insist on client registration form to be signed by the broker/sub-broker before commencing operations.
- Enter into an agreement with your broker/sub-broker setting out the terms and conditions clearly.
- Insist on contract note/ confirmation memo for trades done each day
- Insist on bill for every settlement.
- Ensure that broker’s name, trade time and number, transaction price and brokerage are shown distinctly on the contract note.
- Insist on periodical statement of accounts.
- Issue cheques/drafts in trade name of the broker only.
- Ensure receipt of payment/ deliveries within 48 hours of payout
- In case of disputes, file written complaint to the broker/sub-broker, to the stock exchange of which he is a member and to SEBI within a reasonable time.
- In case of sub-broker disputes, inform the main broker about the dispute within a maximum of 6 months.
- Familiarise yourself with the rules, regulations and circulars issued by the stock exchanges/SEBI before carrying out any transactions.
Watch out for the DON’Ts
- Don’t deal with unregistered broker/sub-broker
- Don’t pay more than the approved brokerage to the intermediary.
- Don’t undertake deals on behalf of others.
- Don’t neglect to set out in writing orders for higher value given earlier over the phone.
- Don’t sign blank delivery instruction slip(s) while meeting security pay-in obligation
- Don’t accept unsigned/duplicate contract note/confirmation memo
- Don’t accept contract note/confirmation memo signed by any unauthorised person.
- Don’t delay payment/deliveries of securities to the broker/ sub-broker.
- Don’t get carried away by luring advertisements
- Don’t be led by market rumours or get into shady transactions
Do you plan to invest in stock market? Do you have some selected scrips in your mind for making investment?
If yes, it is extremely important for you to know how well that stock is performing; at what price is it available in the market and how it is expected to do in future. To arrive at a decision, you need some information related to the stock that reflects the financial implications of the stocks in question. Stock quote is that magical figure that gives you all the information related to stock. Due to all this crucial information they give, these can really be considered as the lifeline of an investor.
Stock quotes can be obtained in newspapers and online but the most convenient place is online as it is very close to real time information. Website of Both Exchanges help you get real-time quotes at a mouse-button click. Different sources provide different sets of information. Some might provide with detailed information like corporate actions, mutual fund activity in the shares in addition to some basic price information. Below is the list of common figures in the stock quote details:
52-week High/Low: These are the highest and lowest price recorded in the last 52 weeks. The highest/lowest price figures for past 52 weeks can help make a judgement whether or not you should invest in stock at current price .
Days Range: It is the price range within which a stock has traded on a day. It thus consists of high/low price the stock has touched in a day.
PE: It is the Price to Earnings Ratio of the stock (per-share earnings by closing price).
Open and Close: Close is the last price quoted on a stock during a day. Open price is the opening price at which stock starts trading for a day. Opening price may not be same as the closing price of the stock on previous day.
Bid and ask prices: Bid price is the price a buyer is willing to pay for a stock while ask/offer is price at which seller is willing to accept the stock.
Trade volume: It is the quantity of shares traded on the stock exchange on a day. It helps you determine the liquidity of stock as you might land up in trouble if you want to sell your share and there is no one to buy it
Percentage change: It refers to the percentage change between current stock price w.r.t to its previous close.
Market Capitalisation: It gives you an insight into the company’s equity capital available for trading and is the price of each share multiplied by number of equity shares outstanding.
Dividend: Some quotes also give the last dividend paid to the shareholders and can be useful in determining how much and what type of dividend can be expected from the company. This also details their record date, ex date so that you can decide upon what time will be right to invest in the stock to avail the dividend.