Stock Trading is all about a system to manage the orders placed by buyers to Buy and sellers to sell orders. The Price, quantity, exit levels are all taken into account by clients while placing the order.

Stock market provides facilities to place the different buy and sell orders (Short / Short Covering, Long / Long unwinding) .

The exchanges handle the delivery of shares and the brokers handle the order placement from clients in to the exchange.

  • Stock trading takes place via the Stock Market Order management System. The buyers and sellers propose their quote via the brokers, The exchange lists the price and quantity offers in Market window, where the deal takes place and by EOD settlement is done.

    Broker: Brokers are the organizations that connect the Buyers and Sellers with the Exchange. Indviduals cannot deal directly with the Exchange. Brokers are responsible for the clients.

    Exchange: Exchange is stock market where all the trading happens. They have to be compliant with SEBI guidelines and Govt norms. Exchanges are responsible for the Settlements. The shares get listed in exchange which are traded by participants. Its a secondary Market. eg: NSE / BSE / NASDAQ / FTSE

    Govt: Its the government that sets the laws which the exchanges have to follow.

    SEBI: Regulatory body that acts as watchdog for Indian Stock markets.

  • The brokerage licence is provide by SEBI by taking a caution deposit, Any counter party risk encountered by exchanges during settlement are paid through the brokers deposit, which the brokers recover from the defaulters.

  • People take up stock trading to make profit in a short time based on the fluctuations in the market price of the share they deal.

  • Yes, its possible to buy stocks from BSE and Sell it on NSE, provide the particular stock is listed in both exchanges.

    We can't buy a stock in BSE and Sell it in NSE on the same day as the settlements are done only by EOD. However we can sell the shares we already have in hand that were bought in one exchange and sell it in another exchange on a given day.

  • Though you quote a higher price, the Exchange considers it as a Price level up to which you are ready to spare and starts fulfilling the order in the best seller sequence in the Market window queue till the quantity requested is fulfilled or available shares for the price up to which you quoted.

  • With the broker provide client login id, we login to the online trading system and place the order by mentioning the Price, Quantity, whether buy or Sell etc. The brokers place these orders in exchange and it is valid till 3:30 PM of the trading day after which its all cancelled automatically if not fulfilled by then.

  • When market price starts going up we buy the share expecting it to go higher, this is Long position. We hold it for some time and sell it later for a much higher price, the selling at a much higher price is Long Unwinding.

    When the market price is going down we sell the share, even though we don't own it at that point in time, expecting it to go further down. Its legally possible to sell even without owning. We hold it and Buy the share when the prices go further down than what we sold it for is short covering .

    Share sold have to be bought before the end of trading day otherwise its automatically fulfilled by the exchange.

  • Stock Trading is a Business. If we forecast the future and wait for the outcome, its Gambling. In a business we study the Risks involved in the venture and what are the quantum of rewards we get for the risk taken and do about our sale / transaction with Knowledge, Patience and Discipline.

  • The stocke prices are decided by the buyers and sellers. Since there are buyers and sellers competing for a price in the stock market , there is a fluctuation in stock price. The company or Exchange or brokers do not decide the price of the stock.

  • When we buy and Stock and hold for a longer period of time, Its called Positional trading. This is an investment strategy, the risk involved is lesser compared to short term trading.

    When shares are bought / sold with in a single trading day (9:15 - 3:30) it is Intraday trading. By 3:30 all unfulfilled orders are automatically cancelled by the exchange.

  • When there is an expectation that the prices may go down, traders sell shares even without owning and later buy it when the price further goes down. Its legally possible. This is called Shorting and Short Covering.

    In case of any unfulfilment / default by buyer / seller, the exchange reconciles the books with the Brokers caution deposit and which the brokers may recover from the client later with a penalty.

  • Trade plan is the strategy in trading like Which Share to Buy / Sell, the price to Quote (Margin of profit based on risk taken), the Quantity to quote, what is the Stoploss level at which we should exit the trade if we are incurring a loss etc.

    A trading plan is necessary to watch the market / understand the risk, have an edge over the sale and exit plan in case of loss.

  • The stock price does not equate to a company's value. Its a health factor which may help promoters to raise more capital based on the stock price and its an indirect way of displaying the company stature and the strength of Management team and decisions.

2 Comments
  1. Naresh 3 years ago

    Hi,
    Good exercises, hope this helped you to recollect the workshop content

  2. Author
    Allen 3 years ago

    Yes Naresh, Thank you Much.

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