For those who love trading in the stock market, the market regulator, SEBI has formed some rules. Before a few decades, the stock trading was done manually in different cities. After the introduction of the computer, there are a lot of changes seen in the Indian economy and one of them is a change in trading style in the stock market. Here the stock trader needs to have a Demat and a Trading account first before going for the trading in the live market. These accounts can be opened with any of the stock trader in the market who is provided license by the market regulator.
The type of trading:
The Demat account is used for the parking of shares purchased for long-term while the trading account is used for purchase and sale of various shares in different segments. One can find the demat accounts offered by the NSDL or CDSL as the best demat account in India. However, for a trader, the significance of a trading account is more than a demat account.
In the share market, one can choose any of the segments from the available options of cash and derivative. In these avenues also there are options such as Intraday and delivery as well as future and options.
Intraday: In this segment, the trader needs to buy and sell the shares of a particular company in the same session of the market. In case the same is carried forward overnightalso, the trade is considered as a delivery one and not intraday.
Delivery Segment: Here the trader needs to take the delivery of the shares. As a tradition, the broker offers him the time of a few days to make the total payment for the shares he has purchased,and he needs to settle the account within such period. This is known as the safest way of trading,but here one cannot be sure about the return on investment as one may have to hold the shares for a long period also. However, there is no pressure of selling shares,and hence one can earn dividend or get benefits of splitting of shares by the company as well as bonus shares. It is also known as the best way to have a good portfolio for the long run.
Derivatives: In this segment, one can either go for futures or options. Here one does not find any units except the contracts. Hence the investment in this transaction is high than that of the cash. The potential of earning in this segment is high,but same applies to the loss also. With every contract, there is an expiry date. Before this date, one has to square off the position. Usually, one can sell or buy the contracts as soon as the prices are increased or decreased that can help him fetch a good profit. Here one needs to understand that the contract value is high and hence if the trade goes inverse one needsto immediately square off the position else it can lead to a huge loss also.