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.

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     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.

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

Trading Account for Unlimited Benefits in the Capital Market

A trading account gives a mighty hand in facilitating a smooth and safe way of sale and purchase of shares and stocks.

Trading manually is fast becoming a thing of the past and is being pushed further away by online stock trading. Paper based instruments had inherent problems and with the expansion of the Indian capital market, the magnitude of large scale trades and settlements, were making it impossible to manage as long as trading in stocks and other securities were being conducted using shares.

India then moved on to demat system, in which bookkeeping is done electronically, where shares and securities are de-materialised and are held and the buying and selling of shares became very easy and risk free, thus invalidating the hassles and problems associated with physical share certificates.

From then onwards, demat account has been synonymous to online stock trading. To open a demat account you need to approach a Depository Participant (DP), and they are the banks, financial intermediaries, stock broking firms etc. who will hold securities and shares on your behalf electronically. Your DP will also provide you with a unique number called BO ID (Beneficiary Owner Identification Number), which will be required at the time of transaction. 

However, a demat account’s function is to hold and transfer of shares and securities, but to actually initiate transaction of sale and purchase of shares, you will have to open a trading account. All you have to do is mention the name of the company from whom you want to buy or sell your shares and the price agreed by you. Then you can contact your broker by online placement of order or calling your broker over the phone, and the broker in turn executes your order on your behalf. After a transaction is completed, your shares will get either debited or credited to your demat account.