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Frequently Asked Questions - Online Share Trading

What are the different types of Market involved in the online share trading?

A: There are two types of market trading in the Indian share market—primary market and secondary market. The primary market is the part of the capital market which deals with issuing new securities to investors. When a firm sells bonds or new stocks for the first time to the public, it creates a primary market. The company, at this point of time, gets listed in a stock exchange and becomes public. The primary trading can take form through an Initial Public Offering (IPO). Secondary trading, on the other hand, is all the trading that takes place subsequent to primary market. At this stage, you can sell your shares to another investor through intermediaries like a stockbroker. Simply put, the secondary market is one where investors trade the previously issued securities without the company’s involvement. The company that issued the shares is now not a party to any further sale between investors.

What are advances and declines? 

 

Advances and declines is a ratio used to identify the direction in the market. It helps in identifying the number of stocks that have advanced in price and those stocks which have declined in price. It helps investors identify the number of stocks participating in the market rise or fall. This indicator helps you discern the volatility in the market. The advances and decline line also helps you to predict if a price trend is likely to continue or reverse. A greater advance-decline ratio signifies an overbought market while a low advance-decline ratio signals an oversold market. If either of the two occur, it means that the market trend is not likely to continue and is about to reverse.

What are the types of share trading orders, I can place?

A: Prices of shares are always fluctuating. At times, it may show an increase, while at other, it may fall. An 'order type' indicates the instructions you give your broker on how to act based on the price of the financial instrument you wish to trade. There are two types of share-trading orders—market order and limit order. A market order instructs your broker to buy/sell securities at the next available price. This type of order carries risk as you do not have control over what price the order will executed at. A limit order, on the other hand, is where your stock is purchased at or below your limit price, but never above it. This gives you control over the execution price. A buy limit order will be executed at or below your set limit price, while your sell limit order will be executed at or above your limit price.

When can I receive the pay out of funds/securities?

A: You will receive the pay out of funds and securities listed on the Bombay Stock Exchange (BSE) on T+2 days. A T+2 settlement cycle indicates that the final settlement takes place on the second business day after the trading day (this does not include Saturdays, Sundays, bank holidays and exchange trading holidays). All the transactions made in the ‘F’ group securities (fixed Income securities) and ‘G’ group securities (government securities for retail investors) are also settled at the BSE on T+2 basis. Pay-in of funds/securities takes place at 11:00 a.m. while pay out out of the funds/securities takes place at 1:30 p.m. Member brokers have to submit the pay-in instructions for funds/securities to banks/depositories by 10.40 a.m.

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