In order to trade a person would first require a broker. This can be done through online or also with a brokerage firm. Online brokerage is better as it offers additional advantages like research, tracking of portfolio etc. If one is interested in investing in shares then SEBI has made it mandatory for trading through demat account where the shares are to be held in the paperless form. The main things required for online trading are
- A demat account - where the shares are held in the virtual format
- A net banking account - to transfer funds to the trading account
- A trading account - to place orders to buy and sell shares
- An internet connection
Once this is done an order can be placed online for the particular stock or stocks. The system checks your trading account for balance and executes the order. This then gets routed to the automated systems at the stock exchange and a unique code is assigned for each transaction. Most brokers charge of commission of 0.5 to 1% of the value of shares.
One can choose to trade online in terms of making an investment which is a long term plan ie the share will be bought with the purpose of keeping it for many years. However there are options to buy/sell shares in a single day and this is known as trading. The risk is high in the case of trading
In addition to this a person would be required to know the workings of the market. It is also essential that one is familiar with the stock market jargon. They should be up to date with the day to day happenings in the business and financial world. There are also many courses designed to increase knowledge on the stock market.
Online share and stock trading entered India around the 1990’s and was looked upon with skepticism. There were many concerns raised particularly security. Gradually it has gained popularity and now a lot of people are into online trading especially with increased awareness among professionals on investments and the time constraints.
A person can expect returns depending on the amount invested and the risk they are willing to take. A safe player can expect average returns while a risky player has a higher chance of making more profits. A sensible person can ensure a regular steady work through trading.
- The process is simplified and hassle free
- The time spent in investing is greatly reduced
- One can invest in shares, mutual funds, gold or IPO’s
- An informed decision can be made as there is a lot of information available online.
- Investment can be made anytime of the day and not necessarily only during the working hours
- Online sites offer competitive prices as compared to the brokers
- Buying or selling is not dependant on the availability of brokers
- You can work from your home, easily and comfortably.
- There is always an element of risk that has to be taken into account
- There is no standard guaranteed workflow in trading
- One must be careful of server problems and other technological glitches