What is Share Trading

What is Stock/Share Trading?

Stock or share trading refers to the process of buying and selling shares of companies listed on a stock exchange. Shares represent ownership in a company, and their value fluctuates based on factors such as company performance, market trends, and economic conditions.

When you engage in share trading, you aim to profit from the price movements of shares. To start trading, you need two essential accounts:

1. Demat Account: This account holds your shares in an electronic format, eliminating the need for physical certificates.
2. Trading Account: This account facilitates the buying and selling of shares on the stock exchange.

Share trading is an integral part of the stock market ecosystem, and it allows individuals to participate in wealth creation by investing in a range of companies.
 

Share trading time in India

In India, the stock market operates during specific hours, and all trading activities must be conducted within these timeframes. The share trading timings for the two major stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), are as follows:

• Pre-opening session: 9:00 AM to 9:15 AM
• Regular trading session: 9:15 AM to 3:30 PM
• Post-closing session: 3:40 PM to 4:00 PM

It is important to plan your trading strategies within these timings. For instance, day traders focus on the regular trading session to capitalise on short-term price movements, while long-term investors may not be as time-sensitive.

How Does Online Share Trading Work?

Online share trading has simplified the investment process, enabling individuals to trade from the comfort of their homes. Here is how it works:

1. Open a Demat and Trading Account: To start trading, you need to open a Demat and trading account with a registered stockbroker.
2. Fund Your Trading Account: Transfer funds to your trading account to purchase shares.
3. Research and Analyse: Use the trading platform to research stock performance, market trends, and company fundamentals.
4. Place Orders: Place buy or sell orders through the trading platform. You can choose from options like market orders, limit orders, or stop-loss orders.
5. Monitor and Manage: Once your trade is executed, monitor your portfolio and manage your investments based on your financial goals.

Online trading platforms offer tools like real-time market data, analytical charts, and research reports to help you make informed decisions.

Types of share trading

There are different types of share trading strategies, each catering to specific investment goals and risk appetites. Let us explore the primary types of share trading:

1. Intraday Trading

In intraday trading, investors buy and sell shares within the same trading day. The objective is to capitalise on short-term price fluctuations. Intraday trading requires quick decision-making, technical analysis skills, and a thorough understanding of market trends.

2. Delivery Trading

Delivery trading involves buying shares and holding them for an extended period, ranging from days to years. Unlike intraday trading, you actually own the shares, and they are stored in your Demat account. This type of trading is suitable for long-term investors looking to build wealth over time.

3. Futures and Options Trading

Futures and options are derivative contracts that derive their value from underlying assets, such as stocks. These trading methods allow investors to hedge their positions, speculate on price movements, or lock in future prices. However, they are complex and involve higher risks compared to other forms of trading.
 

Share trading brokerage charges

When engaging in share trading, it is essential to understand the associated costs. Brokerage charges are fees levied by stockbrokers for facilitating your trades. These charges can vary depending on the broker and the type of trade.

Common brokerage charges in share trading include:

1. Flat Brokerage Fees: A fixed fee charged per trade, regardless of the trade value.
2. Percentage-based Fees: A percentage of the total trade value.
3. Other Charges: These may include Securities Transaction Tax (STT), Goods and Services Tax (GST), and stamp duty.

It is crucial to review and compare brokerage charges before selecting a stockbroker to ensure that you are not overpaying.
 

What happens when you buy a share?

When you buy a share, you become a part-owner of the company. Here is what happens during the process:

1. Order Placement: You place a buy order through your trading account.
2. Order Execution: The stock exchange matches your buy order with a sell order.
3. Settlement: The shares are credited to your Demat account, and the corresponding amount is debited from your trading account.

Owning shares entitles you to a portion of the company’s profits in the form of dividends and gives you voting rights in certain company decisions.

How are share prices determined?

Share prices are determined by market forces of demand and supply. Several factors influence these forces, including:

• Company Performance: Strong financial performance can increase demand for shares, driving up prices.
• Economic Conditions: Factors like inflation, interest rates, and government policies impact share prices.
• Market Sentiment: Positive or negative investor sentiment can cause fluctuations in share prices.

It is important to conduct thorough research and analysis before making investment decisions, as market trends can change rapidly.
 

Add money to your trading account

Adding funds to your trading account is a simple process. Most online trading platforms offer multiple payment options, such as:

• Net Banking
• UPI Payments
• Debit/Credit Cards

Ensure that you maintain sufficient funds in your trading account to execute your desired trades. Some brokers also provide margin trading facilities, allowing you to trade with borrowed funds. However, it is important to understand the associated risks and charges before opting for this feature.