Beginners Guide

Hi friends,

just came into need of starting this thread as most people out there know nothing about trading. i am starting this thread for the beginners, so they can start the trading from the scratch.

Today i felt like there should be thread where we need to tell the users about starting trading from opening account, calculating brokerage To technical Analysis to advanced trading method step by step.i request all the senior members to help me with my thread and suggest me time to time.

Basics of stock market

These Basic Include the various terms that are around in stock market.

What is meant by stock exchange?
a stock exchange is a constituted body for the purpose of assisting, regulating or controlling the buisness of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange whose area of operation is specified at time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. In our country NSE was incorporated as National Stock Exchange.

"an exchange where security trading is conducted by professional stockbrokers"

What is an equity Share?
Total equity capital of company is divided into equal parts of small denominations each called a share. For example, in a company the total equity capital of Rs. 2,00,00,000 is divided into 20,00,000 units of Rs. 10 each. Each such unit of 10 Rs. is called a Share. Thus a company tehn is said to have 20,00,000 equity shares of 10 Rs. each. The holders of such shares are members of the company and have the voting rights.

What is Derivative?
Derivative is product whose value is derived from the value of one or more basic variables, called underlying. the underlying asset can be equity, index, forex, commodity or any other asset.

What is an Index?
An Index Shows how a specified portfolio of shares prices are moving in order to give and indication of market trends. It is basket of Securities and the average price movement of the basket of securities indicates the index movement, whether upward or downward.

What is depository?
A depository is like a bank wherein the deposits are securities like equity shares, debentures, bond, government securities etc., in electronic form. A depository holds securities in an account. it transfers securities between accounts on the instruction of the account holder. A depository further Facilitates transfer of ownership of securities without having to handle securities. it also facilitates safe keeping of shares in electronic form.

What is dematerialization?
It is the process by which the physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to investor's account with his depository participant.

What are the depositories in India?
NSDL - National Securities Depository Limited
CDSL- Central Securities Depository Limited

What is meant by Market Capitalization?
the market value of a quoted company, which is calculated by multiplying its current share price(market price) by the number of shares in issue is called as market capitalization. For example a company A has 120 million shares in issue. the current market price is Rs. 100. the market capitalization of the company A is Rs. 12000 millions.

How does investor get access to internet based trading facility?

Internet based trading facility is the brokerage trading account. Generally refferred as Demat account.

Formalities or documents needed for Demat: - A person needs to have a ICICI or HDFC(in most cases) bank account, Pan Card, Address proof, Chequebook with MICR Code on it(For producing a Cancelled Check.

Choosing Brokerage: - There are many Brokerage firms like ICICI Direct, Ventura, Geojit, Indiainfoline, 5Paisa, kotaksecurities. We can visit the sites of these and choose the company with least brokerage and best Facilities. Facilities like charting etc. Higher the Turnover of the trading, least is the brokerage the company will charge you.

Then the Brokerage firm links your bank account with the demat account. Linking of the account means that you can pay-in our pay-out money from demat account from terminal itself. The Share you purchase will remain in your Demat account.

What is Brokerage and how one should calculate the brokerage

The brokerage that some company charges you is 0.01-0.03 percent in intraday 0.01-0.03 percent in futures, and 0.1-0.3 in delivery. It varies from company to company.

A general table is given below how to calculate it.

So on Intraday we have total Brokerage of 0.08220% on each trade of buy and sell, and 0.05684% in futures buy and sell. It is to be noted that the total is applied to one side only here as the buy and sell are already summed. You can include your brokerage in the above table and get the total brokerage that is charged.

The brokerage structure mentioned in the above table is the hidden charges or we can say the additional charges other then brokerage which are always payable. Most of the broker wont tell you thatso whenever some broker tell you that they are giving you this brokerage then just add the above mentioned.

For example: -
If you a share in intraday (Same day square off) of XYZ company at price say 100. Then total price of the share you should consider is 100 X 0.08220% i.e. = 100.0822 Rs.
This means is that until and unless you sell the above share above 100.0822, you didnt gained any profit, because until that part you have paid price of the share plus the brokerage. So if you sell the share on 100.50 then total profit you made is not 50 paisa but 100.50-100.0822 = 42 paisa appx.
Now this does matter to some new traders that what impact 10 paisa can make on a trade. But when we trade on high volume and large capital this 10 paisa makes the big difference.

Online trading account is not referred as demat account.

A demat account is like a storage for your shares, just as bank is for your money.

Demat account is mostly needed, whether you trade online or offline.

The trading account is a service from the broker which allows you to buy or sell between market and you.

The demat account is linked to your trading account to faciliate easy clearing of shares.

Demat account is required to take delivery of shares. If you are trading in derivatives, demat is not a necessary.

For online transfer, any bank whose payment gateway is linked to your broker's system will do. No absolute needs for ICICI or HDFC bank accounts.

You can also issue cheques to the broker, but only from the account which is linked to your account. Third-party cheques are not accepted now, earlier they used to be.

Thanks for Correcting...terms may be reffered to as differently....but lets make it simple here...

Untill Now i have dealt with : -
1. Icicidirect.
2. Ventura.
3. Kotak Securities.
4. Geojit.
5. Indiainfoline.

all of the above requires the mentioned documents....

hi i m a novice to the world of trading. thanks for the above info...

please take us to the world of
"pickin up shares"
"intraday trading"
"options trading"
"futures trading"
lets begin one by one..

thanks for beginning this thread..

i will post the material as soon as it is ready.....i have been trading for last 8-9 months and i know thats not the vast experience, but will try to put the things as simple as i can and in a manner so that the newbies are not confused. Will introduce everything step by step...keep checking