Depository account for online share trading

Buying shares means that you are having a portion of a business. It is like acquiring a small piece of the cake from a bigger chunk. And an individual who buys shares of a company is known as the shareholder of the company.

The process of buying and selling of shares has become comparatively safe, secure and very convinient in the form of depository services. A Stock broker will provide it’s clients with the provision of depository services that includes settlement, clearing and custody of securities, registration of your secuirties and dematerialization of shares.

You may have come accross the term dematerilization several times when it comes to modern system of online share trading, but if you haven’t then by having a depository account, your paper shares will get converted to the electronic realm and every transaction made i.e. buying and selling of shares is purely digital and done through the fully automated stock exchnages like the BSE or NSE.

The broker in regards to online share trading or opening of a depository account, is the key to your success, as your dematerialised shares will be held in a depository, governed by the NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Securities Ltd.)

Your broker is a registered agent or a Depository Participant (DP) of the NSDL or CDSL, enabling you to hold your securities in your depository account. It is essential that you choose a DP who is a recognised name in trust and performance. As your broker will be responsible of your time and money. Make sure that your broker has a good track record of offering the latest trading platform and that you can execute trades and do so via multiple screens and that you have the stop loss option to avert potentially threatening losses down to a minimum.

With most of the brokers available you can make a phone call to place an order or you can place an order online. And your broker on your behalf will  facilitate either buying or selling of shares, provide market intelligence with the help of years of analytical research, live updates, charts on market movement and statistics of each and every stock you are interested in. So if you have done your homework in sharemarket in India and ready to take a leap in online share trading, then subscribing to a broker and opening a depository account is the first thing that you must do.  

Share trading and opening a demat account

There is no thumb rule to gain huge returns from a stock or determining the direction, as to where the stock market is headed. There are a few principles or rules that will help you in making the right choices in share trading.

Never expect to put your money on a winning stock from sources like investing experts, close ones or rumours surrounding the market. Ones or twice such market tips may prove useful, but it will seriously limit you in being a successful investor, as investing is done through research and analysis of stocks and the market. Luck has never helped anyone in achieving success in share investing.

Investors generally like to cash out their investment which has doubled or tripled in appreciation and keep stocks which are going down in hopes of a revival. But to be successful, you have to be different. To be a long term investor, you should check your temptation of selling performing stocks and try to ride on a winner to seek long-term benefits and quit holding non-performing stocks and risk your stocks to plummet further, making it completely worthless. You should always invest and make choices rationally and not by hope or greed.

A demat account comes first in line when it comes to share trading. A demat account is almost synonymous to trading and it can now be easily opened with a stock broker. A stock broker is a financial intermediary along with others like a bank who are entitled to open a demat account for you through a central Depository like the CDSL (Central Depository Securities Ltd.) and NDSL (National Depository Securities Ltd.)

Different brokers offer a wide variety of stock trading services to their customers. It may include requesting order executions online, call and trade facility, in which you can also place your order if you are not online. Expert analysis on the market, live updates, advisory services etc.

Some of the documents you need to open a demat account are as follows:

     1)      Photocopy of your PAN card.

     2)      Residence proof (Driving license/passport/ration card etc.)

     3)      6 months bank statement.

Opening a demat account and trading in shares has never been so simple. Just fill out a simple form and provide all the necessary documents required in opening a demat account and then you can start investing and create wonderful financial opportunities.        

Open a trading account for share trading

For online share trading having a demat account is the first and foremost thing that a trader should do in order to participate in the unique process of buying and selling shares from the various companies that are listed in the stock exchanges BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) on the basis of their market capitalization.

First of all, let us understand what is a demat account? It is an online medium through which shares and securities acquired by you will be held electronically. Dematerialized shares are maintained in a very safe environment where trading and transfer of securities become a very simple matter.

But it wasn’t always like that and before the concept of dematerialization (demat) existed. There were physical share certificates and gradually it became quite obvious, that it will soon be replaced by a more efficient system of conducting transactions. As there were serious flows with paper share certificates, due to loss of shares in transit or fire, forgery, signature mismatch etc.

But with a demat account all of these shortcomings were eliminated instantly and the stock exchanges were completely computerized to execute and settle trades more effectively. And now it is virtually impossible to think of any other alternative to demat accounts.    

To start trading in shares, you must approach a broker and open a demat account. Make sure that your broker is a Depository Participant and is registered with NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Securities Ltd.)

The DP is like an agent to NSDL or CDSL and the broker’s objective is to open a demat account for you that your shares and securities are held in an electronic form. But you also need a trading account to actually execute buying and selling of shares of the different scripts or companies listed on the stock exchange.

The advantages of opening a trading account are as follows:- 

1   1) No stamp duty charge has to be incurred by you, as the problem of physical shares is removed, as shares are transferred electronically.

è  

     2)With advanced trading software you will get chance to analyze live stock market updates, market analysis, charts, market news etc. in a single screen.

è      

     3) Every trade executed is done on a real time basis and the broker will facilitate buying and selling of shares on your behalf.

Invest wisely by opening a Brokerage Account

A broking firm is a financial institution which is simply called brokerage. A stock broker is a financial institution which facilitates the buying and selling of shares or other securities between a seller and a buyer. Traditionally there are two types of brokerage services provided by the broker. A full service brokerage firm conducts reports on market research to guide the customers in every aspect of investing and manage their portfolio. These traditional brokers have become a genuine source of live stock prices update and quotes.

Whereas, a discount broker is also known as an online broker and charge a marginal sum of money i.e. commission by allowing their customers trade in securities, shares, commodity etc. in sophisticated trading platforms, powered by fully computerized trading system. For the best brokerage deals a trader has to be involved in volume trading for lesser brokerage charges and higher returns.

For trading in equity and securities market you need to open a demat account where all your securities will be held electronically and the flow of transfer of securities is fast and secure. However to actually trade in shares, securities or commodity opening a brokerage account is a must.

But you need to transact on a regular basis with your broker and a trading account will prove beneficial, this sounds simple but in order for you to transact with the broker on a regular basis you must open a "brokerage account" and brokers also offer the lowest brokerage fee to their customers. This confirms, among other things, your brokerage, guidelines to work together and so on. 

Brokers may also specify that you keep a certain amount of "margin" money with them to cover for any trades that you may execute. Further the broker may let you sell shares and have the proceeds available in your brokerage account (not sent to you)- this money can then be used to buy more shares, saves the effort of first him issuing a cheque to you and then you having to give him a cheque.

Advantages of brokerage accounts

·        

          1)Brokerage accounts are opened by individuals who are both new and experienced traders. The new traders will be benefitted by investment tutorials provided in the brokerage accounts and the experienced traders can consult with the analytical reports to make crucial decision on their stock.

·          

        2) In a traditional brokerage account you will discover that the broker will manage your portfolio, prepare market research and help you with your investment decisions. Whereas, in a discount brokerage account you will only receive the basic services of executing your sale and purchase orders.

·          

       3) Having a brokerage account with a reputed broker will ensure that you avail the lowest brokerage on transactions. They offer the lowest brokerage provided that you trade in volume.  

·         Apart from brokerage you will have to pay for annual maintenance fee which is also very cost effective and remember to always trade in volume as marginal transactions will cost you more in brokerage. 

Add confidence in trading with futures contract

Trading in futures has the element of speculation when one tries to lock on the price of a security going up or down on a specific date. Speaking of which, a security can be in the form of a stock, stock index, commodity or currency. Unlike the investment in stock and bond, in futures the trader doesn’t own any commodity but speculates on the futures price of the security. Buying a futures contract involves two very important aspects of trading i.e. buying and selling. A trader sells his security when he predicts the prices are going to fall and buys when the trader expects prices going up.

A futures contract is standardized and it trading is done through a futures exchange in order to buy or sell underlying financial instrument at a certain date in price. The future date is referred to as delivery date. Delivery occurs in both options and futures contract but the delivery of the underlying commodity are rare as the generally contracts are closed before settlement. In a futures contract you can do equity trading and commodity trading and opportunities are endless with this dynamic financial instrument. 

Securities & Exchange Board of India (SEBI) is the apex body regulating the futures exchange and safeguard against traders from controlling the market in an unethical fashion and preventing fraudulent activities from overwhelming the market.

There are two categories in which the traders can engage in futures contract:

In general Hedgers utilize for shielding against radical future price movement in the underlying security. The objective of hedging is based upon the tendency of cash prices and futures value to move in tandem. It is done for minimizing the risks involved in the adverse movements in an asset. Normally a hedge comprises of taking an offsetting position in a related security such as the futures contract. 

Speculators are the second type of players in futures. These include individual traders and investors. Speculators in futures have distinct advantages over other investments. The success of speculation depends on the trader’s judgement and if so then he can make a lot of money in futures market because futures prices tend to change quickly then stocks or real estate.

Cross barriers and open new possibilities with Demat Account

During the last decade the stock market had transcended to electronic trading and the usage of paper certificates of shares has become the thing of the past as the maintenance of paper shares for trade and settlement is very cumbersome. The demat account has become an absolute must for online trading and now an investor can expand his portfolio to commodity and currency along with other securities.   

If you want to participate in an Initial Public Offering (IPO) and have a piece of the pie then you must open a demat account and have all the knowledge related to this process. A demat account is like a depository that holds your shares electronically. There are two apex depositories in India the National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL). And there are over a hundred Depository Participants (DPs) in India and they act as agents for the NCDL and CDSL are empowered to open demat accounts for their customers.

Just like opening a savings account with a bank you will have to open a demat account with a stock broker of your choice. In the demat account your physical shares will get converted to electronic form and every purchase and sale transaction of shares and securities are will be involved with will be done through the stock exchanges BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). Where you will have the privilege to invest in the stock of some of the big players with large market capitalization listed in the stock exchange. 

We will now discuss on the documents you will need to open a demat account with the help of your broker – 

•    By mandate of SEBI a trader has to submit a copy of their pan card and they should produce the original  at the time of verification.
•    Proof of residence and identity has to be duly produced to your broker.
•    You will need passport size photographs. 

Your broker will provide you the demat account opening form and after you had fully signed and attached the required document for account opening then within a short period your account will be ready for you to start trading in the most dynamic wealth creation avenue of trading in the stock market.