What is Online Share Trading

Share trading refers to the buying and selling of the shares of companies that are listed on the stock exchange for profit-making. National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are the two major stock exchanges in India that facilitate online trading. Online share trading is the method of transacting financial products online using the platforms provided by brokers. It can be used to transact in all kinds of financial instruments like stocks, bonds, ETFs, futures options, etc.

Traditionally, when an investor wanted to buy shares, they used to call their broker and asked for placing a buy order for a specific number of shares of a company. The broker would convey the current market price and help place the order. Now, this process is simplified, and the control is in the hand of the investor where they can check prices and place orders on their own using the trading platform.

What happens when you purchase a share?

Once you buy a share of a company, you start owning some stake in the company. For instance, if a company has issued 2000 shares of which an investor owns 200 shares, that means he holds a 20% stake in the organization. This results in shareholders getting a say in the company’s governance and is eligible to vote on major decision-making policies of the company.

Even though this maybe beneficial for those who control a major portion of the company’s shares, from a retail investor point of view, they’ll only gain once there is a price appreciation in the share markets. Hence, investors try to make profits from share trading through the process of selling shares at a price higher than the buying price

How to start trading?

To start trading online you need two accounts- A Demat account and a Trading account. Stock exchanges don’t allow direct trading. You can only trade through a SEBI-registered stockbroker.

  • Demat Account: It is used to store the shares electronically. They are provided by the two depositories - National Securities Depository Limited (NSDL) and the Central Depository Services Limited (CDSL).
  • Trading Account: It helps to place buy and sell orders of shares in the stock market. It gives the interface to check the live prices of shares.
  • To open an account, you must have:

    • PAN Card
    • Bank account
    • Documents for address proof
    • Documents for identity proof

    After you open your Demat & Trading account, you can add money to it and start buying and selling shares.

How Does Online Share Trading Work?

When a user places the buy order for any share, the order gets forwarded to the Exchange. If the price matches with another user’s order who placed a sell request, the order gets executed. The order is settled by the Clearing Corporation. It takes T+2 days for settlement where T is the day of trade. Post-settlement share is credited in the Demat account of the buyer.

How are share prices determined?

After the company goes public and the share of a company starts trading on the Stock Exchange, the share prices are determined by its demand and supply.

If the demand for shares is high due to any favorable factor, then the price will increase. Whereas, if the company’s future growth potential doesn’t look attractive, many investors holding the share might start selling it leading to fall in price.

Difference between Trading and Investing

There are basically two types of players in the share market- “Traders” and “Investors”.

Both are often considered similar since both participate in the share market to earn profit. However, there are a few key differences between the two.

Both use different approaches to make a profit in the share market. Let’s look at the two separately to understand how different Trading and Investing is:

Basis Trading Investing
  • Risk Involved
  • The risk involved is higher as traders try to gain profit from short-term volatility which can be highly erratic.
  • The risk involved is lower as investors avoid making decisions in the short-term volatility and aim for long term gains, typically over the months or years
  • Period Of Investment
  • It is short-term, as the idea is to earn the slightest possible profit by investing.
  • It is long-term as the idea is to hold and grow the investments.
  • Capital Growth
  • It focuses majorly on making short-term profits.
  • It focuses majorly on growing wealth over the long term through capital appreciation and dividend payout.
  • Style of analysis
  • Technical Analysis is preferably used to make decisions
  • Fundamental Analysis is preferably used to make decisions
  • Share trading time in India

    The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are the two primary stock exchanges in India. The share market trading time for the equity market in both exchanges is between 9:15 AM to 3:30 PM (Monday to Friday).

    Conclusion:

    Online trading is trading through the digital platform using the internet. With the Bajaj Financial Securities Demat Account you can get the benefit of a flat fee per trade and save significantly on your brokerage. The more you understand about the share market and share trading, the more benefits you can derive.

    Open Demat & Trading Account

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    Frequently asked questions (FAQs)

    A trader needs to have a trading account for buying and selling of shares in the stock exchange along with a Demat account, to store them electronically. You also need to link your trading account to a bank account for amount-transferring purposes for the purchase of stocks. Additionally, you should possess some basic knowledge of how buying and selling happen on a trading platform. Besides, always keep yourself abreast with the latest market news to spot trading opportunities.

    One of the primary reasons for share trading is that it is a lucrative investment as there is a possibility to reap high returns in a short span of time. Also, by trading in shares, you get ownership in a company. You may read or look up for probable shares to invest in with the help of fundamental and technical analysis. Trading also enables an individual to participate in the economy’s growth story and benefit from its highs.

    Share trading is itself a risky proposition as the demand and supply of shares impact the share price of a company. As a trader, you must be aware of the market news and know when to hold on to or exit a position basis market performance. Online share trading is convenient and simple, however, there’s an added risk element involved as there are plenty of variables influencing the markets.

    With Bajaj Financial Securities Limited, you can open an online share trading account from anywhere in 15 minutes. To open a trading account, you need documents such as a PAN card, proofs of residence, and identity and bank details.

    • Open the application form
    • Fill in the compulsory information like PAN and bank details
    • Upload the essential documents for residential and identity proof
    • E-sign the form
    • Submit the application

    Your login details get updated once account is activated.

    Yes, it is possible as long as you have the required funds in your bank account. Once you have successfully added funds to your trading account, you can look up the shares during market hours and select the quantity to buy.

    You may trade after the market closes provided your chosen stockbroker allows the same. The stock market is open only on weekdays. Also, for those who wish to trade before or after the stock market hours need to place an AMO (After Market Order). You just have to login to your online trading account and select the AMO option. This allows an investor to participate in trading if he is unable to during regular market hours.

    Yes, you can own more than one Demat or a trading account but with different brokers. It’s a legal and preferred way to invest in markets. A few investors have multiple accounts to segregate their holdings based on their various financial objectives.