How to Trade?

"Why is the man (or woman) who invests all your money called a broker?"
George Carlin (1937 )

Step I - Apply for PAN

Yes, the government of India has made it mandatory for everyone to submit a PAN(Permanent Account Number), before investing into Shares. So, apply for it soon.

Click here to apply for PAN Card.

Step II - Select a Brokerage Firm

To buy or sell shares online, you need a reliable broker or sub-broker who will carry out the transactions in a successful way A good broker is one who makes it easier and profitable for you to trade on the Bourse. Therefore, it is a canny idea to put some time and effort, researching a broker for you.The broker is like a mediator between you and the Stock Market. These days a lot of brokerage firms also provide helpful tips on investing in the stocks. You can also ask your friends who can give you some advice on selecting a broker. Remember, that these brokers charge some brokerage, i.e, some amount of money on the value of your transactions. So, negotiate wisely. Another important factor is to check if the broker is registered with SEBI.
Some brokerage firms are listed below -

• Indiabulls
  
  
• ICICI Direct
  
  
• Indiainfoline
  
  
• Sharekhan.com
  
  
• Motilal Oswal Securitiies Ltd.
  
  
• Abhipra Capital Ltd.
  

Step III - Buying and Selling Shares

Next step is to open an account with your selected Brokerage firm. All transactions are done online these days. You are required to pay money to your broker immediately upon getting the contract note/confirmation for purchase/sale of shares. There different ways in which you can buy and sell shares online and it differs among different brokers. So please check with your broker. Generally, brokers come to your home and guide you through the entire process.

Important Terms -III

PART III

• Bulls and Bears
  
  "Don't take the bull by the horns, take him by the tail; then you can let go when you want to."
  -Josh Billings (1818 - 1885)
  
  Person who thinks prices will rise. One can be bullish on the prospects for an individual stock, bond, or commodity, an industry segment, or the market as a whole. In a more general sense, bullish means optimistic, so a person can be bullish on the economy as a whole. When a bull attacks, it throws its opponent upward, whereas a bear grapples its opponent down. The symbol of a bull and bear locked in combat represents the stock market.
  
  One who believes that prices in the security and commodity markets will decline. A bear can profit from a declining stock market by selling a stock short or buying a put option. A bull, the opposite of a bear, thinks prices will rise.
  
  
• Futures
  
  The terms "futures contract" and "futures" refer to essentially the same thing. For example, you might hear somebody say they bought "oil futures", which means the same thing as "oil futures contract". If you want to get really specific, you could say that a futures contract refers only to the specific characteristics of the underlying asset, while "futures" is more general and can also refer to the overall market as in: "He's a futures trader."
  
  A contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
  
  
• Options
  
  A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.
  
  
• Fundamental Analysis
  
  A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies).
  
  
  The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).This method of security analysis is considered to be the opposite of technical analysis.
  
  
• Technical Analysis
  
  A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical analysts believe that the historical performance of stocks and markets are indications of future performance.

Important Terms - II

PART II

Stock Exchange

• The market in which shares are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance.
  
  
  
• Multinational Companies
  
  A corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they co-ordinate global management. Very large multinationals have budgets that exceed those of many small countries. Sometimes referred to as a "transnational corporation"
  
  
• Blue Chips
  
  A nationally recognized, well-established and financially sound company. Blue chips generally sell high-quality, widely accepted products and services. Blue-chip companies are known to weather downturns and operate profitably in the face of adverse economic conditions, which helps to contribute to their long record of stable and reliable growth. The name "blue chip" came about because in the game of poker the blue chips have the highest value.
  

• Buyback of Shares
  
  The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake.
  
  A buyback is a method for company to invest in itself since they can't own themselves. Thus, buybacks reduce the number of shares outstanding on the market which increases the proportion of shares the company owns. Buybacks can be carried out in two ways:
  
  1. Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.
  
  2. Companies buy back shares on the open market over an extended period of time.
  
  
• Stock Splits and Reverse Stock Splits
  
  Increase in a corporation's number of outstanding shares of stock without any change in the shareholders' Equity or the aggregate Market Value at the time of the split. In a split, also called a split up, the share price declines.
  
  Procedure whereby a corporation reduces the number of shares outstanding. The total number of shares will have the same market value immediately after the reverse split as before it, but each share will be worth more.
  
  
• Dematerialization - DEMAT
  
  The move from physical certificates to electronic book keeping. Actual stock certificates are slowly being removed and retired from circulation in exchange for electronic recording.
  
  With the age of computers and the Depository Trust Company, securities no longer need to be in certificate form. They can be registered and transferred electronically.
  
  Rematerialzation is the antithesis of Dematerialization.