Demat Account for Online Share Trading

A Demat account with a bank or any financial institution is what a broker need to do online share trading. It has to be noted that a free Demat account or free trading account are same. Any investor willing to buy or sell stocks online need to have a Demat account or a trading account. You can open a Demat account for online share trading with any bank or financial institution offering the service. This bank or the financial institution will convert your physical security holdings into electronic (Dematerialized) holdings.

How to Open a Demat Account 

Now a days, most banks have the facility to open Demat account. You will have to submit following documents to open a Demat account:
  • Tax Identification Number 
  • A canceled Cheque 
  • Identification proof 
  • Address proof 
  • Photograph 
This Demat account is linked with your bank account. You can easily transfer funds from your bank account to your Demat account for online share trading.

All online trading and transactions that take place through this Demat account is handled by depository participant (DP). All share brokers / stock brokers, brokerage companies and R&T agents register under the SEBI act to handle share trading transaction.

How to Do Online Share Trading with a Demat Account 

A Demat account can help you do online share trading in following ways:
  1. Transfer of Shares and Settlements - A Demat account is opened with a bank registered with a depositary. The depositary handles all the transfer and settlements. You just have to provide an
    Demat Account
    instruction slip. If you are selling securities then it will be a delivery instruction slip. If you are purchasing securities then it will be a receipt instruction slip or one time standing instructions for credit.
  2. Receipt of Corporate Benefits - A Demat account is credit with all securities entitlements like bonus and rights. Just choose the right option in the share application form. This account forwards all cash benefits like dividends and interest directly to you and not through the depository. MICR code in Bank details in your Demat account ensures credit of cash transactions to your respective bank account without any mistake.
  3. Dematerialisation of Shares - The bank in which you hold your Demat account can arrange to convert your physical holdings into electronic form at your request. Just lodge the share certificates with the bank accompanied by a Dematerialisation Request Form (DRF).
  4. Rematerilialisation - The bank in which you hold your Demat account can help you convert your electronic shares back to physical shares.
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Day Trading Tips and Strategies


Day trading is the practice of buying and selling financial instruments such as stocks, stock options, currencies, futures contracts such as equity index futures, interest rate futures, and commodity futures within the same trading day. In any day trading business, a transaction is closed before the market close of the trading day. People or traders participating in day trading business are called active traders or day traders. Most of the day traders are normally employees of bank or investment firm because they have better knowledge and understanding. Most of them are specialists in equity investment and fund management. With the advancement of technology and internet, day trading has become increasingly popular among common investors.

Making Money as a Day Trader

One can make a lot of money as a day trader, but it's not as simple as other small business, currency trading or work from home jobs. Day trading jobs can be done from home but generally need more time and involvement than other work from home business. Day trading involves risks but if one can take calculated risks, he / she can make a lot of money in a short period of time. A beginner or a newbie to this business may even end up losing money. To be a successful day trader, one needs to follow rule of the game and understand some of the basics.

Basics of Day Trading
Day Trading

Many people or investors consider day trading an easy means of investing and making money in a short period of time and get rich easily because they don't need to wait for long periods of time to see their investments grow. One should always keep in mind that while it can be fun to invest in day trading, it's important not to allocate more than 3-5% of total equity corpus for the purposes of day trading. This is a safe amount to stick with because if it is all lost it won't ruin the investor financially. Many people get carried away and will take as much as 25% off their equity corpus for day trading and finally they end up losing all their money.

Day Trading Tools and Software

Today there is 24 hour access to the stocks via stock market tickers, stock market websites etc. Many people think that with all these technologies available today, they are not going to lose their money. This is wrong. These tools may help in day trading but they don't guarantee success. One should always remember that day trading is always risky. It is extremely important to keep an eagle's eye on the stocks. Use all available tools, but don't mistakenly think that day trading is safe.

Understanding Day Trading

Any individual who really wants to make money as a day trader needs to learn and understand some of the basics before investing. Learn day trading terminology like futures, call option, put option, delta, and stop loss trigger. An understanding of these terms can be very helpful.

Day Trading Rules

There are some important rules associated with day trading. Firstly, always be aware of worldwide economic status and the company or stocks' business practices. One should always try to choose large cap stocks with high trading volumes. This will help to avoid getting stuck with an illiquid stock. A day trader may also have to book losses. This will improve future profits. As a day trader one can always learn with experience and time. A day trader should set standards and try to achieve set targets.

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Share Trading Mistakes - Stock Trading Mistakes To Be Avoided

Stock trading is a business where even the slightest mistake can lead to huge loss. Investors must learn common share trading mistakes to be avoided. They must learn from their own past experience, experiences of friends and family members and other market experts.

Here are some tips and advice on how to avoid common stock trading mistakes:
Avoid Stock Trading Mistakes
  1. Quality Vs Quantity: Buy only quality stocks. Do not run after cheap and poor quality stocks.
  2. Cut Losses: If your stock is continuously falling then book loss at 7% - 8% below your purchase price. This will protect you from further loss.
  3. Follow The Market: Yes, follow the market and try to buy at the right price. This way you increase your chances of making profit and in case the market goes against your stock, you will suffer minimum loss.
  4. Low Stock Prices: If price of a stock is low, it doesn't necessarily means that you can buy it. Do all your homework before investing.
  5. Be Practical: Don't be emotional is stock trading business. Be practical. If you have bought a stock for $ 100 and it comes down to $ 92. Sell it off and close your position. Buy it back when the market conditions are in favour of the stock.
  6. Invest for Long Term: Never invest your money in stock market for short-term. Invest for long term.
  7. Portfolio Management: Decide and create your investment portfolio. Investing without a planned portfolio is not professional. Have a diversified portfolio.
  8. Set You Goal: Set your investment goals. Decide when and why do you need the money back and invest accordingly.
  9. Monitor Top Mutual Funds: Keep an eye on top mutual funds and where they are investing money. Fund managers at mutual fund companies are highly qualified and experienced people. They do all expert study and research and study the market before investing. Spot stocks where these companies are investing and do some homework yourself and invest in those stocks.
  10. Have Patience: Never be in hurry in stock market business. This business demands patience. Do not panic.
  11. Monitor Stock Market: Monitor the stock market and current affairs in the country. Monitor top news and act accordingly.
  12. Avoid Margin Trading or Intraday Trading: Margin trading or intraday trading can be highly risky. Avoid trading.
  13. Book Profit at The Right Time: Book your profit at the right time. Never be too greedy.

Investment Portfolio Management

In my previous articles, I have already explained Have Diversified Portfolio - Why? - Portfolio Management  and Portfolio Vs Age - Portfolio and Age Relationship. Here I am going to explain few other important aspects of better investment portfolio management.

Portfolio Review

Assuming that you did all you homework and managed your portfolio based on your age and risk profile and you have a diversified investment portfolio. In a volatile world of share trading and investments, this is not a guarantee of making money or success. Now you have to be more professional in managing your portfolio to decrease or even eliminate risks. For this, you need to periodically check and review your portfolio and make some changes depending upon the market conditions and other internal and external factors. When to review your portfolio depends on the type and amount of securities held in the portfolio. Remember, it is your hard earned money and you just cannot lose it. It is expert advice to constantly monitor your portfolio and make adjustments as the situation demands. In a volatile market you have no option but to closely monitor and act swiftly and intelligently.

How To Make Adjustments in Portfolio

Portfolio Management
Making adjustments doesn’t mean you need to hurry and buy or sell shares. Here are few expert tips and suggestion to help you.
  • If a stock that you bought earlier had given you your consistent expected results but the price is not going up for some time, don’t rush to sell it off and close your position. Hold the stock. Have patience. The stock will improve when the current unfavorable conditions are gone.
  • Never sell stocks thinking that you can buy it back when the prices are right. When you do this, you have to pay commission or brokerage to your broker for selling and again for buying. Also you may not be able to decide when to buy back the stock.
  • Have a diversified portfolio. Invest in different sectors and in different stocks depending upon your fund and risk profile. As experts say – Never put all your eggs in one basket. Diversify your investment
    to decrease risk.
  • Rotate your investment across different sectors. If a particular sector had done well in a session, it doesn’t means it will do better again in the next session. There is no guarantee. Think like a
    professional investor and not like a trader. Look at sectors where there is less of Extreme Volatility. These are the sectors to target. Book profit from fully valued stocks and reinvest in current and future good “BUY” stocks. You can also consider targeting stocks that are temporarily down for some temporary reasons.

Measure The Performance of Your Portfolio

Monitor and measure the performance of your portfolio twice a month. Compare performance of individual stocks with overall performance of the market. If you have done all your study and research, you can ignore swing of the stock market.

Resources & References:

DIY Investment Strategies

Understanding Stock Market
When & What to Buy? When to Sell?

Portfolio Vs Age - Portfolio and Age Relationship

The age of a person determines what would be the best investment portfolio for his or her future. Whether to invests more in equities and less in fixed income or less in equities and more in fixed income depends on the age of the person.

As a simple rule, the less the age the more risk a person can take because he or she has more years to earn money.

Portfolio Vs Age
The more the age, the less risk a person must take. So, portfolio management depends on age and risk profile. However, one must remember that fixed income cannot compete with ever-rising inflation. It is equities that can compete with the increasing inflation and hence everyone must have some equity in his or her portfolio. Also it is important to diversify fixed income investment to different tools like government bonds, fixed deposits and debentures etc.

Below table will explain how to manage portfolio based on age:


Age

Portfolio
Above 60 40% in Stocks and Mutual Funds
10% in Cash
50% in Fixed Income
50 to 60 50% in Stocks and Mutual Funds
10% in Cash
40% in Fixed Income
40 to 50 60% in Stocks and Mutual Funds
10% in Cash 

30% in Fixed Income
30 to 40 70% in Stocks and Mutual Funds
10% in Cash

20% in Fixed Income
Below 30 80% in Stocks and Mutual Funds
10% in Cash

10% in Fixed Income

Resources & References:

Have Diversified Portfolio - Why? - Portfolio Management

It is very important to have a diversified portfolio to minimize risks and protect your investment. Diversification of investment in different investment tools shields you from market fluctuation and potential risks.

Investment in Stock Market

When investing in stock market, it is important to buy shares of different stocks from different sectors. Even the best stocks possess some risk and there is always a chance of loss. Apart from investing in high-risk high-gain shares, it is important to invest in some defensive stocks to protect your hard earned money from potential losses.

Risk-Free Investment

Investors must also invest some portion of their saving in government bonds and Bank Fixed Deposits to safeguard their investments as these tools possess very less to no risk. These investment tools also offer fixed income.

Portfolio management is all about managing investment so that the invested money grows with minimum risk. The best strategy to portfolio management would be to select the best performing sectors and then pick the best performing stocks within these sectors and then invest your money. Apart from stock market, people should also invest some portion of their saving in money market fund and in fixed income tools.

Portfolio Management

Resources & References:

Stock Trading | Share Trading | Mutual Fund | Stock Market

Share trading, stock trading, mutual fund, stock markets are all terms of investment. These investment tools help to invest your savings in the growth of an economy by becoming shareholder of a company and help your money grow with growth of economy and companies.

Beginners to investment need to understand the basics of share trading and how to invest in stock market. Proper study and research is a must for a profitable investment and to avoid loss.

Share trading is all about making wise decisions as to when to buy shares, when to sell shares and whether or not to hold shares of a company.

This website is designed to help beginners understand the basics fundamentals of share trading and stock market and invest their money wisely and make profit. Investors who have some gained some experience in share trading may also find this website very helpful.


Explore following articles to learn all about share trading and stock market.

New to Investing?

Saving & Investment Options
Why Invest in Equities?

Set Your Investment Goals

Basics of Stock Market

Invest Like an Expert