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GETING STARTED WITH ONLINE TRADING

Posted by  in December 29th   

THINGS EVERY INVESTOR SHOULD KNOW ABOUT ONLINE TRADING::–

Q.1 When does an investor receive shares/funds after payout?

An investor will receive shares withing 48 hours of receiving the payout from the exchange. In case the investor’s account shows a debit, the system will automatically hold back the shares. In such an event shares will be transferred to your DP account only after he clears his account.


Q.2 Which are the shares that can be traded online?

The investor can trade in all the shares that are in completely dematerialized form. Curently, there are 761 shares that fall under this category.

Q.3 What is the advantage of opening an Internet-banking account?

Faster credits, smooth flow of transactions and early commencement of trading are the advantages that the customer will enjoy.

Q.4 Which is a trading Limit? What is a multiple?

The trading limit is the maximum exposure a customer can have at a time. This limit that will be granted will be a predetermined number of times the customer’s marging account.
The trading multiple reflects the permissible Trading Multiple applicable to clients on their Trade capital.
The Total trading Limit reflects the gross trading limit applicable to client’s after considering Total Capital and the Trade Multiple applicable to client before the commencement of settlement.

Q.5 How is the trading limit determined?

You will have to have some cash or shares deposited in your trading a/c.This is referred to as the Margin. Your trading limit will be a multiple of this Margin.
For instance: say u have Rs. 50,000 in ur trading a/c.This is ur marging amount.
The broker may either give you a direct amount based on this, like 3 times this amt will be your trading limit—Rs.1,50,000.You have this much to trade online.

Q.6 What is Margin trading?

Margin is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. Margins are thus collected to safeguard against any adverse price movement. Margins are quoted as a percentage of the value of the transaction.

Q.7 How does margin trading work?

Margin trading can be understood with the following example: Let us say you buy a stock for Rs.50 and the price of the stock rises to Rs.75.
If you bought the stock in cash account and paid for it in full, you will earn a 50 % return on your investment.
But if you bought the stock on margin –paying Rs.25 in cash and borrowing Rs.25 from your broker-you will earn a 100 % return on the money you invested. Of course, you will still owe your firm Rs. 25 plus interest.

…..AKASH

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7 Comments

Arun Said,
December 29th, 2005 @7:23 pm  

Wonderfull Info :)

This is something different and surely help many. Why not make a complete list of Q &A and we can start our FAQ’s section too.

Cheers !!

mygif
akki Said,
December 29th, 2005 @11:12 pm  

hi,arun,,akash here..
thanx 4 ur positive response…and i will be hanging more on such matter on the site…watch it too…bye

mygif
Madhur Said,
December 31st, 2005 @2:19 pm  

Dear Akash.

This was a very informative Q & A for people who have no clue about Online trading but i think you should have included the basic questions too. For Eg .

1. How does online trading take place??

2. How does the transfer of money takes place online??

3. How are shares recieved online and how can you buy or sell shares??

4. What are the functioning modalities??

5. Can you see the CMP of shares online??

6. What is a margin trading and what is a cash trading??

7. Who all can open a online trading account and what is the trading limit??

8. Can you trade in stocks in NYSE or other foreign markets??

I am sure u can find answers to these questions too and update our fellow boarders bout them.

Kindly do this asap.

Madhur Khandelia

mygif
Gautam Said,
December 31st, 2005 @4:54 pm  

hi akash
i have a querry. let me know the solution to it.
suppose we purchase shares today for Rs.10000 and we have 5000 in our trading account… now we have to pay Rs.5000 on T+2 basis… are we required to pay interest for these two days or the interest starts after the T+2th day…. coz im facing a peculiar situation…
let me know are you dealing in shares….

Gautam Khetan

mygif
akash Said,
December 31st, 2005 @10:58 pm  

hi madhur…thanx for u encouraging comments..and i will def.make furter database to be added here…in a couple of days..
bye..akash

mygif
akash Said,
January 2nd, 2006 @11:40 am  

Hey Gautam,
This is in reference to ur query in the e-mail dated:______
Following points are worth noting:-
1:- INTEREST from the period of entering into a transaction upto the T2 period, will not be chargeable on the securities purchased.
For instance: in ur example on Rs. 5000/- no interest will be charged upto T2 date…

2:- Secondly, for the chargeability of interest after T2 date there are two categories:-
A: – A grade shares (near abt 200) provides funding and in dat case after T2
Date the Interest is to be paid by the investor.
B: - Other shares provides no funding, rather they wait till the settlement date
, else they cancel the deal.

mygif
Madhur Said,
January 2nd, 2006 @1:46 pm  

hi akash…

I wud appreciate if u continue with the one thread that you have started on one topic instaed of posting another thread on the same topic. This will help in keepint things simpler. People will ask you questions by posting comments and u can reply doing the same. So i am taking the liberty of deleting ur new Q & A on the same topic and i am posting it here. Sorry brother but i hope u understand.

Freinds,…..below is Akash’s reply to my queries….and m sure he will reply to ur queries too..

For the bigginers, GETTING STARTED WITH ONLINE TRADING today, contd,———
Answers to the following questions will definitely lead a new investor to enter into the BULLS AND BEARS.:-

Q.1:-How does online trading takes place?

An investor is not linked to the market directly, rather through his online broker. When trading online an investor needs 3 accounts-a demat account for your shares, an internet banking account where your money is kept and a trading account which allows you to transact online (such as with Karvy).
The chain of process of online trading revolves around these 3 accounts. Demat account for holding your Securities in Dematerialized form.
Internet banking account for settling your monetary payments and receipts as well.
Trading account through which you are eligible to enter into Online Tades of Securities.

Q.2:-How does the transfer of money takes place online?

Transfer of money involves Payments to trading account and receipts to trading account from the Internet Banking Account.
Certain Banks that offer trading platforms make for seamless trading and payment options. Certain banks offer direct transfer from a bank account to the trading a/c. For instance With ICICI Direct, the transfer will be instant from your ICICI Bank account into your Tracing A/c.Same with HDFC Sec.and HDFC Bank.

Q.3:-How can you buy and sell shares? And how the shares are recd. Online? And how you see the CMP of the securities online?

You have a number of portals to choose from, as many Online Brokers now provide this facility. One can generate from the outlook and behaviour of the market, that in which portals he should buy or sell his existing shares. Once the portal is known to be purchased or sold. You can online transact from your trading account directing to the respective task. And you will receive the shares within 48 hours of payout from your internet banking account. Moreover the various Brokers provide the online Fluctuations in MP of the securities. One can easily log on to that aspect through this online information to transact online.

Q.4:-What is Cash Trading and Margin Trading?

Cash Trading is the facility that can be used only for selling your Demat Stocks which already exist in your Demat A/c. When you are looking at an immediate liquidity option, “Cash on spot” may work the best for you, on selling shares through “Cash on Spot”, money is credited to your Bank A/c the same evening and not on the exchange payout date.
Margin is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. Margins are thus collected to safeguard against any adverse price movement. Margins are quoted as a percentage of the value of the transaction.

…………..Akash

mygif

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