what are the steps to Invest in Stock Market?

What are stocks? And what is a Stock Market?
Stock Market

8 Methods of Trading Procedure on a Stock Exchange.




Before selling these securities through the stock exchange, the company has to get its securities listed in the stock exchange. the name of the company is included in listed securities only one stock exchange authority is satisfied with the financial soundness and other aspects of the company.

 Previously the buying and selling of securities were done on the trading floor of the stock exchange today it is executed through a computer and it involves the following steps:

1. Selection of Broker:

 The buying and selling of securities can only be done through SEBI registered brokers who are members of the stock exchange. The broker can be in an individual, partnership firm, or corporate body. So the first step is to collect a broker who will buy/ sell securities on behalf of the investor or speculator.

- PAN Number.

- Date of birth and address.

- Educational qualification and occupation.

- Residential status ( Indian/NRI).

- Bank Account details.

- Depositary A/c details.

- Name of any other brokers with whom registered.

- Client code number in the client registration form.

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After taking this information broker opens a trading account in the name of the investor.

2. Opening Demate account with depository:

 Demat (dematerialized) account or beneficial owner (BO) account refers to an account with an Indian citizen must open with the Depository Participant (banks for stockbrokers) to trade in listed securities in electronic form. The second setup in the trading procedure is to open a Demat account.

The securities are held in electronic form by the depository. The depository is an institution or an organization that holds securities for example shares, Debentures, bonds, mutual funds, etc. At present in India, there are two depositories NSDL (National securities depository Limited) and CDSL (Central depository service limited). 

There is no direct contact between depository and investor. depository interacts with investors through depository participants only.

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Depository Participant will maintain securities account balances of investor and intimate investor about the status of their holding from time to time

3. Placing the order: 

After opening the Demat account, the investor can place the order. The order can be placed to the broker either (DP) personally or through phone, email, etc.

 Investors must place the order very clearly specifying the range of price at which security can be bought or sold example "Buy 100 equity share of Reliance for not more than 500 per share."

4. Match the share and Best Price:

 The broker will then go online and connect to the main stock exchange and match the share and best price available.

5. Executing order: 

when the share can be bought or sold at the price mentioned, it will be communicated to the broker terminal and the Order will be executed electronically. The broker will issue a trade confirmation is a slip to the investors.

6. Issue of Contract Note: 

After the trade has been executed within 24 hours,  the broker issues a contract note. This does not contain the detail of the number of shares bought or sold, the price, the date and time of the deal, and brokerage charges.

A unique order code number is assigned to each transaction by the Stock Exchange and is printed on the contract note.

7. Delivery of Share and Making payment:

 Now the investor has to deliver the share sold or pay cash for the share bought. This should be done immediately after receiving the contract note or before the day when the broker shall make a payment or delivery shares to the exchange. This is called pay in a day.

8 Settlement Cycle: 

Cash is paid of securities are delivered on pay in the day which is before.  T+2    as the settlement cycle is T+2 days on w.e.f. April 2003 rolling settlement basis for example if the transaction has taken place on Monday then payment must be given Wednesdays T+2 (Transaction day and two or more days).

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