Trading in stock market has become hassle-free and less time consuming with online trading platforms. Brokers facilitate online trading for all kind of financial securities. In addition, they provide all the necessary support and assistance to an investor online which makes the trading journey easy and smooth. You can view real-time stock quotes, investment statements, research reports, get secured real-time access to stock exchanges, stock price analysis, the latest financial market and companies news, etc.
What is Online Trading?
Online trading is simply the practice of purchasing and selling financial securities, i.e., shares, bonds, mutual funds, ETFs, options, futures, commodities, currencies, etc., through a broker’s internet-based trading platforms. Many times online trading is called e-trading or self-directed investing.
What happens when you place a trade
- When an investor places the order to buy/sell a particular financial asset using an online trading platform, the order gets saved in the database of the trading platform and the exchange platform.
- If the asset price matches with the trader’s desire/demand, he/she needs to confirm the order for further processing. Both parties need to validate the trade.
- Once the order is confirmed, it will be executed, and securities with transaction details will be reflected in your online trading account.
Thus, you can place or cancel your trade orders at the comfort of your home during trading hours in the stock market, i.e., 9:30 AM – 3:30 PM.
Required Accounts for Online Trading
To utilize the online trading platforms with multiple investing and trading tools, you need the following accounts:
Online Demat Account
Demat (Dematerialized) account is the mandatory account to enter the stock market. You need to open it with a depository participant that can be an authorized bank, individual, or firm. The demat account is the online storage to hold securities in digital or electronic form (e.g., shares, bonds, mutual funds, etc.).
There are two central depositories in India – the National Securities Depository Ltd and the Central Depository Services Ltd. They authorize depository participants to serve investors and traders. Only depository participants/stockbrokers are the medium to interact with central depositories. Depository participants maintain your demat account and its holdings.
Online Trading Account
Along with a demat account, stockbrokers provide an online trading account also. It is the account required to make transactions to buy or sell securities in the stock market. Soon after the stock markets replaced the outcry system with the electronic system, you need not visit any stock exchange to buy/sell a financial asset. Using online trading accounts, the buyers and sellers can meet on stock exchanges.
It is a savings account with a bank. You can open a 3-in-1 account with a bank registered for online brokering services. If you already have a bank account, you can open a 2-in-1 that includes a demat account and a trading account with a depository participant.
Formalities to open Online Brokerage Accounts
To complete the formalities of opening a demat and trading account, you need to submit the copies of following documents to a stockbroker:
- PAN card
- Residence Proof
- Income Proof
- A cancelled cheque
- Passport size photographs
That’s it. The stock broker will verify the documents and after an in-person verification call, you are ready to open the mandatory demat and trading account online.
Thus, the trading procedure involves the following steps:
- Selection of a stock broker.
- Opening online Demat and trading Accounts with the stock broker.
- Placing the order.
- Executing the order.
Safety Measures for Online Trading
Online services are inherently subject to a few risks. Therefore you need to be taken the following safety measures:
- It would be best to prefer a personal safe internet connection to log in to your demat and trading accounts instead of a shared internet connection, PCs, or cyber cafes.
- Remember to log out every time you complete a trade to avoid any misuse of your account.
- Protect your device with antivirus software.
- Change your demat and trading account password from time to time, and do not keep it remembered on your device to avoid any fraudulent activity.
Now you can enjoy a simple, easy, and fast online trading system.