A tour of how trading works and how can you make money with it

4:43 AM Jhon 0 Comments

Stock market has always appealed to masses who want to make quick money within a short span of time. It is a place where you don’t need any qualifications to earn money. Trading is the process of buying a stock or a commodity and holding on to it with an idea of selling it at a higher price.

Successful trading involves buying at a low price and selling at a higher price. It you are able to sell at a higher price you will be a successful trader. In order to trade in securities you need to open a demat account with a broker which will enable you to buy/sell stocks from that account. When you open a demat account a unique id under your name is generated with which you can buy and sell securities on the stock exchange.

Since shares are stored in an electronic form and there is no hardcopies of the contract involved; these securities are stored in your demat account.

Let us see the different types of buy and sell order you can place while trading:

Normal order: A normal order needs to be executed when you wish to hold the stocks you are buying for a long period of time. Whenever you buy shares of any company; there are different charges that you incur like brokerage, securities transaction tax, service tax etc.

Out of these charges brokerage is variable and depends on what percentage your broker is charging you brokerage at.  There are brokers who offer zero brokerage trading these days. It does not mean that they will not charge any brokerage but the brokerage they charge is very less compared to other brokers operating in the market.

Intraday orders: Intraday orders are orders which get squared off at the end of the day’s session. The only benefit intraday orders have is that they have 5-7 times margin offered by your broker. It means that in an intraday trade you can trade for 5-7 times the capital you have in your account.

Limit order: Another sub type in buy and sell order is limit orders. You can place a request in your trading platform to buy or sell a share at a particular price, so when the stock reaches the price you have set; your order gets executed automatically.

Stop loss: This is another very important feature of your trading platform. It is very useful in an intraday trade. It lets you sell your stock if it falls below a price decided by you.

 Suppose you buy a stock at Rs 100/- and you want to sell it at 102/- and you are willing to take a risk of Rs 1/- on the lower side. You can set a stop loss at 99, so if the share falls at 99 you shares will be sold. It protects you from market volatility and is an important thing to use in an intraday trade. 

These are some of the basic things you will need to make use of when you start trading. There are other interesting things that you will discover yourself while you are trading in real time.