Share Trading

Share trading may not be as difficult as it sounds and is no rocket science. We will try and make it as simple as possible for every person to understand.

Stock broker: A broker is some one who sells or buys the stock on your behalf. For this the broker will charge a commission just the way a real estate broker does every time you want to buy or sell a property. This rate is the brokerage rate or the commission rate.

Now lets understand the stock market. Every day millions of shares are being traded on the stock exchange. Let us take the example of the sensex or the Bombay stock exchange. Now there may be hundreds of companies listed on the stock exchange but the Sensex is the weighted average of the share price of the top thirty companies on the sensex. The top thirty companies are chosen by the sensex and give us an indication about how most of the stocks are moving on the sensex.

When there are more buyers wanting to buy a stock then sell it then you can expect the stock price to rise where as when there are more people wanting to sell the stock then you can expect the stock price to go down. Remember the current stock price is the last traded price at which some one bought the stock and some one sold it to the buyer.

Buy/sell quote: Generally analysts or equity research specialists give buy sell recommendation to investors about the stock. Buy price is the price at which you should buy the stock and sell price at which you can sell the stock.

Bid/offer price: Bid price is the price at which you can sell the shares and offer price is at which you can buy the shares.

Since investing or trading appears to many as an easy way of making money any people tend to get lured into the world of share trading. Though trading in stocks is quiet simple. You need to possess some basic knowledge of the security that you will be trading in before you get started.

To begin with the markets are run by several forces many of which are still not understood by pundits who have been tracking the markets for decades and hence be wary of analysts or other equity research professionals who recommend hot picks or any selling items or buying items. Though they may have some reasoning behind their thinking it is better to use your own discretion while investing because it is after all your hard earned money which is going to be invested.

You should not get carried away by any market rumours. Rumours such as a x or y bank is gong bust are common to hear and may have some negative people behind it. At a time when rumours are spreading far and wide it is imperative to pay attention to only the facts.

Before investing in ay stock do your research thoroughly. Run through the financials of the company. Go through the investor presentations and analyst meets presentations which may be present on the web site of the company and then decide whether the company is worth investing into.

Penny stocks which are the types of stocks who are priced very low may not always be able to guarantee successful results all the time.

All investments have certain kinds of risks that they might be carrying and you need to be aware of them. And hence don’t go overboard with your investments and invest entirely in the stock of a single company. Distribute your investment
options across several
fields.

Before you actually begin share trading and enter the world of the markets it is advisable to go through the list of the dos and the donts related to share trading. While entering the market you need to take the following precautions.

Ensure that the broker or the sub broker that you are about to be using has a contract note issued under his name. The contract name should contain the name of the broker, his address as well as the Securities exchange board of India that is SEBI’s number of that particular broker. You will also find the signature or the stock broker by the authorized signatory.

The brokerage or the sub broker can not charge more than 2.5% of the value that is mentioned on the purchase or the sale note.

In the case of a broker the registration number given by the SEBI will begin with the letters INB and that of a sub broker will begin with the letters INS. So make sure you check this before you choose our broker or sub broker as may the case be. See that you have the contract note from the broker with in a day of the transaction being made.

Always keep asking for monthly or periodic statements of funds and securities from your broker or the sub brokers.

Do not sign any blank delivery instruction while performing any share trading transaction.

Keep a regular tab on your financial placements and keep the contract notes or any other receipts safely even after the transaction has been completed.