Open a demat account to participate in online trading in India. After opening the demat account, you can log into it and start trading. The trading window of the Indian stock exchange starts at 9.15 am and ends at 3.30 pm. Therefore, this is the time period when you can buy and sell stocks. Here are four critical steps that you must understand to indulge in share trading:
Step 1: Finding a DP
A DP (Depository Participant) will help you to open a demat account online. A DP is a registered stockbroker with either CDSL or NSDL which are the major depositories in India. There are many benefits of a demat account. It allows you to trade online and hold various securities like equities, government securities, corporate bonds, mutual funds, etc. Moreover, it provides safer and quicker transactions like dematerialization of shares, transfers, buying and selling shares, etc.
However, before proceeding with the account opening process, go through the various demat services offered by the DP. Also, compare the services offered by the DPs with their brokerage rates. The brokerage is either charged as per the volume of trade or on a flat-rate basis. Flat-rate brokerage enables you to minimize brokerage charges as you pay the same amount for trading in particular security irrespective of the trade volume. Traditional brokers charge a fee according to the trade volume. Therefore, the brokerage can be higher if you participate in trading frequently. However, they also provide consultation services and brokerage tips and insights that prove to be crucial for a beginner.
You must also go through the other rates like demat account opening charges, AMC (Annual Maintenance Charges), etc. before finalizing a DP. All this research is essential because a slight difference in the brokerage rate can have a significant impact on your profit margin. It is possible to open multiple demat accounts but you can open only one demat account with one DP.
Step 2: Account Opening Process
After finalizing a DP, visit their website and fill out an online application form. After that, submit the documents and complete the online verification process. Upon successful verification, both DP and you will enter into an agreement that mentions your duties and rights along with the responsibilities of the DP.
The DP will provide you with a BO ID (Beneficiary Owner Identification) which will also be your demat account number. You will need this number to log in to your demat account.
Step 3: Start trading online
After logging into your demat account, add money from your bank account. A bank account has to be linked to the trading account from which you wish to add money. Trading and demat accounts are simultaneously opened. Therefore, there is no need to follow two separate procedures for the same.
Many brokers also provide a trading app to their customers. Therefore, it is possible to trade online without any issues. Also, with the help of the trading app, you can monitor your securities and profit and loss statements whenever you want to.
Step 4: Invest wisely
Before investing in any stocks, it is necessary to carry out detailed research on the stock company. You may have to check their annual turnover, annual and monthly returns, P/E (price to earnings) ratio and other fundamentals before investing in them.
It is also advisable to compare the stocks and standings of a company with its peers i.e. other companies who are in the same business. It will provide you with insights into the best-performing stocks in a particular industry.
After getting all the green signals for investing, buy the shares of the company in a quantity that suits your budget. If you happen to buy a stock at a higher price, average down its price by buying it at a lower price when the stock price gets reduced. When you buy a stock at a price that is higher than when you initially bought it, the average price of that particular holding goes up.
To earn a decent profit after paying the brokerage, sell the stocks at a price that is much higher than the average price of the stock that reflects in your demat account. When you trade in equities, you may either participate in intraday trade or delivery trade. Intraday trading does not allow you to hold a stock for more than a day. It means that you will have to sell the stock before the trading window closes at 3.30 pm irrespective of which time of the day you purchased it. Delivery trade allows you to hold the stocks for as much time as you feel like holding them. Learn how to trade in different market segments like Futures and Options, currencies, equities, commodities, etc. to increase your chances of earning a higher profit.