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How to Trade in Indian Share Market

In order to begin trading, you will require demat and trading account, both available with leading stockbrokers as Angel Broking. A demat account will act as the common repository that allow you to store the shares you have purchased, whereas a trading account will facilitate the actual buying and selling activities.

The Process of Trading

  • When you buy a share using your trading account, money is transferred out of your bank account and the share is transferred into your demat account
  • When you sell a share, it is transferred out of your demat account into the share market. The money resulting from the transaction will be madeavailable in your bank account.

Share Market Basics

As an Indian investor, the two share markets that you can trade in are:

  •  National Stock Exchange (NSE)
  •  Bombay Stock Exchange (BSE)

 

The two depositories with which all depository participants are registered are:

  • National Securities Depository Ltd (NSDL)
  • Central Depository Service Ltd (CDSL).

Two methods of trading

Trading is one of the methods of how to invest money in the share market. It can be defined as active form of buying and selling of securities with an intention to make profit.

There are two types of trading:

In intraday trading or day trading, you must square off all positions before the market closes. For the purpose of intraday trading, you may avail of margins, which is defined as the funding provided by the broker to increase your exposure in the stock market. It allows you to purchase/sell additional number of stocks, which would otherwise require you to invest greater amount of funds.

Delivery trading involves buying the stocks and holding them for more than one day, thus taking their delivery. It does not involve the use of margins, and hence you must possess the funds for your share market investments. It is a more secure method of investing in the Indian share market.

How Much You Should Invest

How much financial risk you can tolerate should determine how much you should invest. Your investments should not endanger your savings. It is also important to diversify your portfolio and utilize features such as stop loss to minimize losses.

What Should You Base Your Decisions on?

  • Financial analysis:

    Financial analysis is used to make inferences about future share prices and overallhealth of acompany using company reports and non-financial information such as industry comparisons and estimates of demand for growth of the company’s products. It is important to ask questions such as “What advantage does this firm have over other firms?” or “Does it have a sizeable market share?”
  • Technical analysis:

    Technical analysis involves the use of a two-dimensional chart to map the historical movement of prices. It uses historical values of share prices and volume charts to make predictions about future prices.

Using both types of analysis will allow you to make sound decisions.

Know Your Rights

Before entering into a contract with a broker, ensure that it is registered with SEBI and that its credentials support its claims. Ensure that you receive a ‘Statement of Accounts’ for funds and securities settled every quarter, and documented proofs of all deposits that you make.