Share Trading: Meaning, Types & How It Works

Share market trading involves buying and selling shares in a company, representing part ownership. Traders aim to profit from changes in stock prices.
Share Trading: Meaning, Types & How It Works
3 mins
31-May-2025

Equity trading, or stock trading, involves the purchase and sale of company shares or derivatives derived from them with the aim of generating financial returns. Shares represent ownership stakes in publicly traded companies and contribute to their overall market capitalisation. Equity trading is a widely recognised and popular investment market, alongside foreign exchange (forex) and commodities.

What is share trading?

Share trading means buying and selling the shares of companies listed on the stock exchange to make a profit. Online share trading involves buying and selling stocks through an online platform. Using the online share trading account, you can easily buy or sell share stocks, mutual funds, bonds,  sovereign gold bonds, bonds and other securities without the need for an intermediate broker or agent.

Pro tip

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Share trading time in India

The national stock exchange (NSE) and the Bombay stock exchange (BSE) are India's two primary stock exchanges. The trading time for the equity market in both the exchanges is between 9:15 AM to 03:30 PM, Monday to Friday.

How to start trading?

To start trading, opening a Demat and trading account is the first step. It is not possible to trade directly in the stock exchange. A stockbroker registered with SEBI (securities and exchange board of India) and stock exchange provides you with the facility to open a demat and trading account. Demat account holds the shares in digital format, and open trading account helps you transact in the stock exchange. Both are essential to trade in the share market. You must have a PAN Card, bank account, and documents for proof of address and identity proof to open an account.

Open a Demat and trading account with Bajaj Financial Securities Limited and start trading.

Types of share trading

Share trading generally falls into two main categories: active trading and day trading.

Active trading involves investors who make 10 or more trades per month. These traders often rely on market timing strategies to profit from short-term movements triggered by company-specific or broader market events.

Day trading, on the other hand, focuses on buying and selling the same stock within a single trading day. Day traders aim to capitalise on rapid price fluctuations and typically show little interest in a company’s fundamentals.

What happens when you buy a share?

When you buy a share, it means you start owning some stake in the company. For example, if a company has issued 1000 shares, of which an investor owns 100 shares, so he holds a 10% stake in the company. As a result, shareholders get a say in the company’s governance and can vote on critical decisions of the company.

While this may be advantageous for those who control a larger portion of the company’s shares, for a retail investor, the benefit of owning a share is derived from their potential price appreciation in the share markets. Thus, investors try making profits from share trading by selling shares at a higher price than the purchase price. But then the question arises, what causes share prices to change in the share market?

How are share prices determined?

In the stock market, prices are established through a price discovery process, where buyers and sellers reach an agreement on value. This mechanism depends on the bid and ask prices. The bid represents the price a buyer is willing to pay for a certain number of shares, while the ask is the price a seller is prepared to accept.

Additional readStock Market Timings

Add money to your trading account

To begin trading, you must ensure that your trading account is adequately funded. Several methods are available for transferring money into the account, each with its own features and limitations.

One of the most common methods is using a payment gateway. Many banks offer net banking and debit card options to credit funds instantly. However, using credit cards is not permitted, as per regulatory guidelines. Be mindful that your service provider may levy charges for such transactions.

Bank transfers via NEFT (National Electronic Fund Transfer), RTGS (Real-Time Gross Settlement), and IMPS (Immediate Payment Service) are also widely used. NEFT is free and generally takes a few hours, while RTGS is suitable for high-value transfers above ₹2 lakh. IMPS enables round-the-clock transfers, even outside banking hours, providing added convenience. When using NEFT or RTGS, ensure that the trading account is added as a beneficiary for smooth transactions.

Another method is transferring funds offline using cheques or demand drafts. Though reliable, it usually takes two to three days for the funds to reflect in your account. Properly signed cheques and an adequate account balance are necessary to avoid penalties.

UPI (Unified Payments Interface) has become a popular instant transfer option, thanks to its ease of use and integration with bank accounts.

Share trading brokerage charges

When you start trading, charges will be levied on your share market transactions by the stockbroker, which is a fee for the services provided. A full-service stockbroker will charge a percentage of the transaction value as brokerage. They provide additional services such as stock recommendation, advisory services, and customized reports, and hence the charges are on a higher side. On the other hand, discount brokers provide Demat and trading accounts and the basic tools to help you make trade decisions by yourself. As a result, the charges are comparatively low, usually a flat fee per transaction, irrespective of the transacted value.

With Bajaj Financial Securities limited, you can get the benefit of a flat fee per trade and save significantly on brokerage costs. Share trading is one of the investment avenues that can help in the potential growth of wealth to accomplish your life goals. The more you understand about share trading, the more benefits you can draw from it.

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Frequently asked questions (FAQs) on share trading

What do you mean by share trading?

Share trading refers to the buying and selling of company shares through a stock exchange with the aim of earning a profit. Investors trade shares based on market movements, company performance, and other economic factors. It can be short-term, like day trading, or long-term based on investment goals. Share prices fluctuate due to demand and supply, and traders use various strategies to capitalise on these changes, seeking gains from price differences between purchase and sale.

How does share trading work?

When you place a buy order through your broker, it is routed to the stock exchange. The exchange searches for a matching sell order. Once a match is found, the trade is executed at an agreed price. After confirmation, your broker notifies you of the completed transaction and updates your trading account accordingly.

What does share trading require?

The trader should have a trading account to buy or sell shares in the stock exchange and a demat account to store them electronically. You should link your trading account to a bank account so that you can transfer the amount for the purchase of stocks. In addition, you should have some basic knowledge of how buying and selling on the trading platform works. Also, keeping yourself abreast of the market developments will give you various trading ideas.

Why do we trade shares?

Stock trading entails the purchase and sale of equity securities, commonly known as stocks, within publicly traded companies. Profit is generated by acquiring stocks at a lower price than their subsequent selling price.

Is online share trading risky?

Online share trading does involve risks, which can vary depending on your approach, financial goals, and broker reliability. Although it provides real-time access and ease of use, risks include market volatility, potential financial losses, and cyber threats. Managing these risks through informed decisions and secure platforms is essential for safer trading.

What is an example of share trading?

An example of share trading is buying shares of a company XYZ. If you believe the company’s stock price will increase in the future, you can purchase shares. If the price does rise, you can sell your shares for a profit. However, if the price falls, you may lose money.

What is the main aim of stock trading?

The main aim of share trading is to earn profits by capitalising on price movements. Traders buy shares at lower prices and sell them when values rise. Some also invest for long-term appreciation, expecting the company’s growth to reflect in higher share prices over time, ultimately increasing their investment value.

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