What are shares?
It’s a means to own a company.
The definition of ‘Securities’ as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.
What is Share Trading?
Shares trading refer to buying and selling of company shares – or any derivative products based on company stock – with the motive of profit earning.
Prerequisites for Share Trading
• We need to have DP(DEPOSITORY PARTICIPANT) account.
• We need to have a Trading account
• And of course money
How Trading Happens?
Companies get themselves listed on popular stock exchanges like NSE, BSE
Interested traders using terminal provided by their brokers trade on those shares.
Online Trading participants
• Investor- Participates through website of brokerage using internet and computer.
• Brokers- they contact each other through trading terminals and they also find who is interested to buy or sell shares.
• Stock exchange- It facilitates transactions through its servers. Most dominant stock exchange in India are NSE and BSE
• Registrar of Company-It is a government body that maintains records of all shareholders and updates database changes whenever ownership changes.
• Depositories- It includes depository participants which stores shares in electronic format.
• SEBI (Securities Exchange Board of India)- SEBI is a government body which regulates financial markets and looks into Investor complaints against companies.
Kinds of Trading
Delivery based trading
Intraday trading includes buying and selling of stocks within the same trading day. The stocks purchased in this kind of trading, are not purchased with an intention to invest, but for the purpose of earning profits by analysing the movement of stock indices.
Deliver based Trading
Delivery based trading means buying shares and holding them for certain period of time is called delivery based trading.
In this method you have to place your buying request through your broker and pay for the current price of the stock. Once your request is executed the stocks that you have bought are deposited to your DP account. In this process you have to pay the full amount of the stock price. Once the stocks are deposited to your account you can then sell the stocks or hold them for as long as you want.
The delivery based trading at the cash segment is the simplest way of trading and the risk is comparatively lower.
The biggest advantage of delivery based trading is that you do not have any time limit for selling the stocks. But the disadvantage of delivery based trading is that you have to pay for full price of the stock and the brokerage is higher than other forms of investments.