In this post I am going to list / discuss fundamental concepts that as an investor you must know before operating your demat + Online Trading account.
In this post I am going to discuss the first question that arises in the mind of a new investor:
How to buy shares using your demat and trading account?
Also Read: Buying Shares using Demat Account
Here are a few things to remember :
- Your Demat Account is merely an account which keeps track of which shares or equities you have bought and you currently hold in your portfolio. So there is not much to do as far as 'operating' demat account is concerned.
- Your Online Trading account is the account which is used to place buy and sell orders. It is important to understand how to buy and sell shares using your online trading account. If you are interested in learning this, i recommend you watch THIS DEMO. It doesn't matter if you have a online trading account with sharekhan, or sbi or motilal oswal or any other online broker. This demo will help you understand basic concepts involved.
After having read the demo, you can go through the following list of 'must know' items.
- There are three types of BUY (or SELL) orders you can place. Market Order, Limit Order, Stop-Loss Order.
- There are two types of "Order Terms", i.e. Day and IOC (Immediate or Cancel). Day order means your order remains valid for that day until the market closes. For example if you place a day order to buy Tata Steel at Rs. 250, then your order will be valid throughout the day and will be executed as soon as there is a seller selling the shares for less than or equal to 250. As opposed to this if you place an IOC order, it will be executed at that moment if there is someone selling tata steel shares at a price of at most 250. If there is noone, the order is cancelled immediately. You do not have to manually cancel it. IOC is typically used by Intraday traders, if at all.
- You can either place an Intraday order or a Delivery Order. Intraday orders are squared off typically 15 minutes before the market closes. A buy Delivery order means the shares are deposited in your demat account (on third working day). A sell Delivery order means shares are sold from your demat account (you must first own them !). Note that Brokerage Charges for Delivery Orders are usually more than the brokerage charges for Intraday Orders.