What is procedure of buying shares through a Demat account?
If you want to Buy shares Online, One should open Trading and Demat account with so that you would get Unique User Id and Password through which you can Buy/Sell Shares.
Let say, You bought SBIN 100 Shares on Monday, typically Broker would tranfer the shares to your Demat account on T+2 day i.e Wednesday. Remember that When you’re Buying Shares means some one is selling to you and when you are selling means some one is buying, so basically ownership of the shares is transferring from One party to other. During this process Clearing Banks/Clearing Corporations(NSCCL)/Counter parties/Depositories Participants(CDSL/NSDL)are involved.
Let me Explain:
- When you buy shares you need to pay the total amount to Broker and Broker will pay that amount to Exchange as an Payout obligation.
- NSCCL(Clearing Corporation) would clear and settle Transaction of both the parties i.e Buyer/Seller.
- If Counter party(Seller) fail to delivery shares, Exchange will participate in Auction Market between 2.00 pm to 2.45 and give the Shares in T+3 days which is called as Bad delivery/Short delivery.
Importantly limit order and stop loss order are used together to minimize the risk. Stop Loss Order Stop loss orders are used to reduce or to minimize the losses. This is very important term especially if you are doing day trading (intraday trading). Stop Loss order as the name indicates this is used to reduce the losses. In Stop loss order the trigger price has to be mentioned, by the trader, and once the price reaches the trigger price the order get executed with the best price available between the trigger price and the limit price. For example - Suppose the trader bought the Reliance Industries at Rs 1000. So he puts the following order to protect his losses. The limit order of Rs 990 and stop loss trigger price at Rs 985
Trading in stock market procedures. What is called share trading in share market? Trading means buy and selling and share trading means buying and selling of shares in share market. Types of Share Trading Mainly there are two ways of share trading. 1) Online Share Trading 2) Offline Share Trading 1) Online Share Trading Doing share trading with help of computer, internet connection and with trading and demat account is called Online Share Trading. If you would like to do online share trading then you need to have a computer, internet connection and online trading account. If you are planning to do trading yourself then opening online share trading account is advisable. Basically people use online share trading who want to trade themselves. Essential of Online Stock Trading 1) Online trading account - You have to open an online trading account with any of the bank or financial trading system like There will be nominal annual charges but in fact nowadays some of them are offering free accounts. To have the list of brokers please see the bottom of this page. Please also read the certain precautions which you need to take while opening the demat and trading account. 2) A computer with internet connection but nowadays some people do trading in internet cafe. Due to fall in electronic prices the computers are available at very affordable prices in the market. If you have electricity problems then you also need to have inverter. Nowadays you can get internet enabled on your cell phone (which is called GPRS) whose speed will be sufficient to do trading and also the charges of GPRS are very nominal. Also internet broadband connection is available. 3) After successfully opening the online trading account you will receive the username and password with the help of which you can login in online trading system and trade yourself. 4) The trading system executive (with whom you opened trading account) will help you initially about how to use the online trading system. But in fact you can request for demonstration of their trading system before you open the trading account with them. Once you get familiar with the system then you can trade yourself at your home or in the internet cafe. Benefits of Online Stock Trading 1) There is no need to depend on any broker or anybody else to place the order or to square off your order. In short you are the boss of your own to do trading (buying and selling) of Stocks. 2) Its reliable, convenient and you can take your own decisions yourself by actual seeing or analyzing the market on the computer screen instead of calling the broker all the time. 3) It’s not possible or practical for a broker to update you about each and everything about the Stock market, news which will influence or affect the Stock market. Because he may be having many other customers like you and even if he updates you it would be late and this news would have been affected the concerned sector or Stock. So if you are doing online trading yourself, then you may save yourself from big disaster by booking profit or by coming out of the stock. 4) You will get news and updates on various websites and also on your online trading system and most of the information will be free of cost. Please note - “Always remember Stock market always get influences (or affected) by the appropriate news. So get updated or be in touch with news all the time. This will benefit you always. 5) By doing online trading yourself, you can see and judge where market (or your Stock) is heading by seeing different graphs online yourself, which is not possible if you’re trading through broker. Some online trading systems have graphs integrated in their system, so your job is to just add those graphs and check the status of current market (or Stock) and depending on your analysis you can take steps towards successfully trading. (How to analyze graphs are mentioned in different sections). 6) All your transactions and related documents can be seen online and can also be downloaded to your PC without depending on your broker. You can also check the status of your amount on daily basis through you online trading system.2) Offline Stock Trading Doing Stock trading with the help of broker or through telephone is called offline Stock trading. In other words trading will be done by another person on your behalf based on the instructions given by you. The other person would be a broker. The broker will do buying and selling of Stocks on your behalf depending on the instructions given by you. So in offline Stock trading you don’t need to have computer, internet connection but you need to have the offline demat account. Different methods of buying and selling of shares Following are the two methods of buying and selling of shares in Indian share market. 1) Market Order 2) Limit Order 1) Market Order When you put buy or sell price of a stock at market rate or select market order option in trading terminal then the price get executes at the current rate of market. The market order gets executed immediately at the current available price. In market order the shares will get executed at the best current available price. Market order is used if you want to execute your order very fast and at available price. If you wish to buy or sell shares at any specific price then market orders is not suitable for you then have to go for limit order. Market order is for those who want to buy or sell immediately at the current available price. 2) Limit Order It’s totally different from market order. In limit order the buying or selling price has to be mentioned and when the share price comes to that price then the order will get executed. But here it’s not sure that the price will come to your limit order and the order get executes. In other words in limit order the specific price is mentioned and trader or investor wait till the stock price reaches that price and once the stock price reaches that price then the order will get execute. Day traders has to take very precaution while using limit order, especially who make use of margin amount In day trading, because you have to close all your transactions before 3:30 PM and if in case the price doesn’t reach to your limit order then your order will be open (pending) and then you have to go through the penalties. Importantly limit order and stop loss order are used together to minimize the risk. Stop Loss Order Stop loss orders are used to reduce or to minimize the losses. This is very important term especially if you are doing day trading (intraday trading). Stop Loss order as the name indicates this is used to reduce the losses. In Stop loss order the trigger price has to be mentioned, by the trader, and once the price reaches the trigger price the order get executed with the best price available between the trigger price and the limit price. For example - Suppose the trader bought the Reliance Industries at Rs 1000. So he puts the following order to protect his losses. The limit order of Rs 990 and stop loss trigger price at Rs 985 So if the reliance industries stock price starts falling and if it reaches 985 then his trade executes with the current market available price. Note - The stop loss trigger price is placed below the limit price in buy order and above the limit price in sell order. 2) Offline Stock Trading Doing Stock trading with the help of broker or through telephone is called offline Stock trading. In other words trading will be done by another person on your behalf based on the instructions given by you. The other person would be a broker. The broker will do buying and selling of Stocks on your behalf depending on the instructions given by you. So in offline Stock trading you don’t need to have computer, internet connection but you need to have the offline demat account. Different types of Stock trading 1) Day trading and 2) Delivery trading (it is also called as investing) are the two main types of Stock trading. 1) Day trading Buying and selling of Stocks
**Procedure of buying shares through a Demat account** The broker asks his client to deposit money Then the broker buys shares for the client The shares bought will be transferred to client's demat account. The settlement cycle is T+2 days so the shares will be delivered after T+2 days Thanks :)
Dear Jaggu, D-Mat accounts are used just like net banking of any bank accounts. when you open a demat accounts than you should get a login id and password. By using such details on respective service provide website you can login your account and start dealing in share and securities. just like by using net banking you can transfer money, making fixed deposits etc. same d-mat accounts are used. after login you can purchase share and sell. Any other query feel free to contact us. Writer CA Chitranjan Agarwal