If you are new to Indian stock market then this article is going to help you with the basic activities of share trading. Share trading is one of the quickest way to earn money as well as to loose money in short time frame in honest way. You maybe a housewife, a student, a retired person , even you are in service and involved in 8 to 12 hours job then you can earn some extra money in stock market in a short time frame.

What is Share market or stock market

It is the online market where you can buy a company’s stocks or shares. Stocks/ equity /cash all means the same thing in share trading terminology. Share or Stock refers to a particular companies share price which varies everyday ( 10 to 500 Rs for each stock) with time.

By purchasing a stock you shall be tagged to a company’s business. If the company makes profit in future then the stock price will go up and you shall gain more money w.r.t your invested amount. If the profit goes down or the company makes losses or involved in unfair activities then its share price will go down and you may lose money. Not the whole , but a portion of your invested money.

Why people sell stocks when it’s price goes down?

Yes there is always an option that they can wait till the price comes up again to the price level when they bought the share, but there is also possibility that the share price go down more and more making the loss higher. So for the fear of more loss traders sell stocks to save capital.

Stock price gone down – you can loose money or earn money

  • At this moment the Tata Motors Company share price or stock price is 175 Rupees( Rs / INR) approximately.
  • Which was Rs 230 to 238 a month ago.
  • But Tata Motors profit has gone down 50% recently.
  • So share price came down from 238 Rs to 175 Rs in the past one month or so.
  • Those who bought Tata Motors stocks @ Rs 230 (say 100 or 1000 quantity shares) & if they sell all the quantity now they will lose (230 – 175 = 55) Rs per stock(share) approximately.
  • So if they have bought 100 shares of Tata Motors, they will lose 5500 Rs and , if they bought 1000 stocks they will lose 55,000 in just one month.

When Stock Price falling you can earn money too…

This is the story of loss, but if somebody knows in advance that the share price will go down, then he can sell Tata Motors 100 quantity or 1000 quantity, in advance without buying it in the month of April 2019 and will buy it in May 2019.

So a smart guy can earn Rs 55,000 /40,000 / 30,000 it does not matter what is the amount , but he can earn in one month taking the risk of investment of Rs 1,75,000 to 2,30,000. So this is a story of share trading in down market of a stock, sell first then buy.

Is it possible ? Can I sell without buying a stock ?

In the above picture , today when I am writing this article, 6th June 2019 Indusind Bank stock price fell 100 Rs in a single day. So if somebody sells one stock at 9.15 AM , and buy it now at 2PM he/she will get 100 Rs approximately. And if you sell 100 quantity and buy it later then you shall get 10,000 Rs in a day. No investment.

The above thing is short selling, sell first then buy

  • Surprised?
  • How they will sell if they have not bought it .. yes it is true in stock market
  • You can sell a stock in advance if you have not bought it.
  • So this is the story of trading without investment, and you have to close whole trade today in short selling.

I have just told you the story of selling in advance of Tata Motors stock in Indian stock market. But this is very uncommon thing to common people. Now I am coming back to the normal way which people likes most.

Buy now , sell later and book profit

  • Today 4th June 2019, Tata Motors company stock price is around 174 /173 Rs per share.
  • It is much less price compare to Tata Motors stock recent history.
  • In last one year, it gone to the peak price of Rs 400 to 450.
  • So it is a very lower price for Tata Motors stock and I have seen that it gone down to Rs 150 (Yearly lowest) and it came back or bounced back from the price and gone to 200 to 238 Rs.
  • So by this logic, present price Rs 175 is not bad .
  • If you buy it now 10/100/1000 quantity of Tata Motors stock as per your budget or money , when the share price will go up in future and will reach 200 or 250, then you will get rupees 25 to 75 per stock .
  • So your earning is
  • 250- 750 Rs for 10 quantity Tata Motors Stock purchase
  • Rs 2500 – 7500 for 100 quantity
  • 25000 – 75000 for 1000 quantity.
  • This is all you can get in short time like 1 month to 3 months.

Does it sound complex ? Does it requires much labour. Just invest in proper time and get the Apple when it will get ripe. Yes you need some money to play in Stock market.

How much money you can earn in stock market

  • It does not make sense at all because it depends on the invested amount or the amount on which you can take risk.
  • Most of the trading systems will give you 10 to 15 times margin per day, for example say if you put 10000 rupees for share trading in your account, and you can treat upto 1.5 Lakh rupees margin in a day, and upto 30000 Rs margin for 1 month to 3 months.
  • That means you can buy 1.5 lacs Rupees stock and bound to sell in same day by investing only 10000 Rupees.
  • If you buy and hold a stock for 3 months to 3 year, 30% to 5 times return is possible.
  • Indiabulls Ventures stock price was Rs 25 per share in 2017, in 2018 it gone to 800 Rs, 40 times return.

Share trading types : Intraday & Delivery mode

Intraday Trading explained

Say another stock, Larsen and Toubro price per share is 1500 Rs.

The story of gain in Intraday trading

  • Today at 9.15 am stock price is 1500, you buy 100 quantity.
  • Total cost price of 1.5 lac
  • At 11 am stock price gone up to Rs 1514.
  • Rs 14 up per share.
  • You sell all 100 quantity of stocks.
  • So you earn Rs 1400 in a day.

Now how can you lose money in Intraday Trading

But if stock price goes down to 1480 , you will loose Rs 20 per share, all total Rs 2000 for 100 shares.

But if you don’t want to sell ? Then you need to put Rs 1.5 lacs , cost of 100 Larsen and Toubro stocks in your DMAT account and you can hold it life long.

Then it’s no longer intraday trading and it will be called you purchased stock in delivery.

Delivery Trading Explained

When you buy some stocks and keep it in your DMAT account for at least one day to life long, then it is said that you bought the stock in delivery.

  • Where as in intraday trading you need to buy and sell stock in the same day during the trading session from 9:15 a.m. to 3:30 p.m.
  • But if you faced loss and stock price came down lower after purchasing the stocks in Intraday mode, then what ?
  • You can convert it from Intraday to Delivery mode and hold it for life long .
  • Delivery trading is holding a stock for at least one day.
  • E.g Buy today and sell tomorrow, or day after tomorrow or the next day to after 1 month/ after 10 years/ after 20 years then this will be in delivery trading and you need to put money for the purchased stock in your account.

About DMAT account

  • You can open a DMAT account in any bank or in any share broking firms to trade in stock market or share market.
  • You can not use your normal savings or current bank account for share trading.
  • You are bound to open a DMAT account either in the same bank or in some other banks or in some share trading firms or stock broking firms to earn money in stock market.

Where shall I open a DMAT account?

  1. Shall I open a DMAT account for stock trading in a bank ?
  2. OR in a share / stock broking firm.
  3. Are the Stock Broking firms a safe place for Share Trading?
  4. Why should I open DMAT account in stock broking firms instead of opening a DMAT account in a bank ?

I am giving all the answers one by one-

For Intraday traders or Delivery traders Stock Broking good firms are recommended, because (Answer to Q4 ) Most banks don’t provide any margin for intraday or delivery trading.

Margin is a very big thing for the traders because normally you don’t have the big amount of money to trade in intraday or in delivery trading. The broking firms provide 3 times margin in delivery and 15 times money in intraday trading which the banks don’t provide.

I have explained below what is Margin in share trading below in details in the next section and the margin is not free, it is only free for next 2 days but after that you have to pay the interest of the extra money explained below.

What is called margin in Stock market

Traders always love to trade on high quantity of stocks to earn more in little time.

  • Say you have 10000 Rs, so you can buy 20 quantity of a stock of price 500 each.
  • If the stock price goes up say Rs 10 you get Rs 20 X 10 = 200 Rs with the help of your 10000 Rs investment in a day (Intraday Trading).
  • But broking firms will give you 15 times (15X) money, so you get 10000 X 15 = 1 Lac 50000 Rs to trade.
  • So now in Margin you can buy 300 stocks in a day instead of 20 stocks in your own money, at the end of the day you got 300 X 10 = 3000 Rs, now is it clear what is margin?

Margin is the extra amount of money provided by the stock broking firms as loan, which you use to buy stocks in stock market or other markets.

Normal banks don’t provide any margin that is extra money for trading but the share broking firms provide 3X margin for 90 days or 30 days at 18% interest rate. Margin varies firm to firm. Not every firms provide same margin.

Margin for delivery trading explained with 18% interest rate

In delivery trading some stock broking firms provide 3X margin.

  • If you invest 10000 Rupees , then you can buy stocks of upto 30000 rupees.
  • Th extra 20000 rupees you will get as loan from the share broking firms @ 18% annual interest rate.
  • You shall get this loan for maximum of 30 days to 90 days period.
  • Normal traders open DMAT account in share broking firms, instead of banks like State Bank of India, HDFC, Axis, ICICI.
  • CAUTION : If you do not put the extra 20000 rupees in 90 days or 30 days in your DMAT account then the share broking firm will sell the extra amount of stocks you purchased in 20000 Rs loan amount.

If you don’t want to use margin then its okay, you can use your bank’s DMAT account and you don’t need to open a DMAT account in share broking firms.

So when to buy a stock and sell it in stock market

Stock price fluctuates everyday and depending on the stock or company it varies 10 paise to 1000 INR ( rupees ) everyday and there is some stocks whose price fluctuate around 1000 rupees or more in same day, (stocks of Eicher Motors/ MRF).

So the bottom line you have to identify the lowest price or lower price area and have to buy it and have to sell it when the price will go higher in the delivery trading.

In delivery trading you should buy a stock when the price is much much lower in a certain time frame of 1 to 6 months and have to sell it when it will go up after few days/ weeks/ months/ even year and book profit and it will be your earnings in stock market.

This is the trading which most traders do and make money everyday or in a week /10 days /15 days/ 7 days.

What you need to learn in stock market to book profit

  • When to enter the market to buy stocks
  • When to exit from the market by selling it.
  • How to save your capital invested in stock market
  • how to book profit and minimise your loss.
  • How to get out of wrong trade.

How to get out of wrong trade after buying a bad stock

  • In share trading you can earn money, as well and you can lose money too and this happens to every traders, but you should keep your loss to a minimum and this is the basic of stock trading.
  • Calculate what loss you can bear, and leave the stock with bearable loss, and don’t wait for bad stocks to come up again.

You don’t need to bother too much about your stock price, if you have invested in right time because it will go up surely. So the key point is, you need to identify the bottom level of a stock price and buy the stocks at that level and when the stock price will go up and reach the peak you should sell the stock, release your money and book profit.

It is the basic of share trading but this is very simple to listen, but very difficult to implement because you don’t know what is the bottom most position so you need to learn when to buy and when to sell.