Zero to One Basics of Trading

What is trading?

Everybody is well acquainted with the term "trading." In the simplest sense, trading means the exchange of one product or commodity with another, i.e., buying of goods and services in exchange for money.

The term trading as used in financial markets also has the same principle. For instance, let's assume that a person who likes to trade in shares or equity is buying a small portion of a company. When the value of the equity increases, the shareholder sells the equity and thereby, makes a profit. This is trading since the person buys the share at a certain price and sells it at another price with the sole motive of earning a profit. At times, there can be a loss if there is a fall in the price of the security. This upswing and downswing of price take place mainly due to the principle of demand and supply.

How is trading done?

Trading is done to buy and sell securities. However, without the opening of any account, this task cannot be accomplished. There are also certain charges involved as well as various legal issues. Certain steps have to be followed if you wish to start trading. They are as follows:

• The selection of a stock broker.
• Short listing of brokers,
• Submission of the necessary documents required for opening the Demat and trading account.
• Researching the companies, both fundamentally and technically.
• Carry on with trading.

Things needed to start trading

Once a person acquires the basics of trading, certain things are a must to enter into the world of trading. They are:

• Identity and address proof documents like Voter card, Aadhar card, PAN card, and bank statement.
• Bank Account.
• Trading Account.
• Demat account.

How trading takes place?

Earlier, trading in exchanges used to be held in India without the involvement of information technology. It involved waste of time and was highly inefficient at the same time. It gave rise to restrictions on the volume of trade. For improving the efficiency, National Stock Exchange of India introduced a platform to serve the purpose of online and automated trading system that was screen based too. Satellite communication technology known as National Exchange of Automated Trading (NEAT) was introduced to serve the purpose of trading.

User id and password are required to enter into the platform. The system only allows the client, who is registered, to log in using the id and password. Once logged in:

• Orders can be easily placed with the aid of the “place order” window given on the website.
• The client enters the stock code, price, and quantity of the security on the “place order” option.
• The order can be reviewed using the “review” option, and you also have the option of resetting your order.
• With the “send” option, the orders with which the client is satisfied can be transmitted quickly.
• After order placement, a confirmation message is received along with the value of order and order number.
• If the order is rejected on account of any reason, a related message appears at the bottom of the online screen.
• If the trade is executed, fund transfer to the account is necessary, and stocks are either debited or credited according to the buy or sell order.