Stock market- All you need to know

stock market details

stock_market_basics

Stock Market

In this post we will explain each and everything about Stock market, how to open your account, documents required, common terms used in stock market, different segments in stock market, how to choose brokerage firm and major myths related with share market.

What is Stock Market?

Companies register themselves in stock market to raise funds and then utilize this fund to make profit.

Buyers(investors) buy shares of these companies and when the company makes profit, the price of share also increases. For example you purchased 1000 shares of xyz company at 50 rupees per share in equity segment, so your total investment is Rs. 50000. After certain time the price of that share raised to 58. Now if you decides to sell your shares you will get 58000 rupees, which means a profit of Rs.8000.

Likewise there are different segments in stock market:

  • Equity
  • Future and options
  • Currency
  • Commodities

Every segment will be explained in detail, but first lets get familiar with common terms used stock market.

  • Bid– A bid price is the highest price a buyer is willing to pay.
  • Execution – It is the completion of buy or sell of an order.
  • Leverage – It is buying stocks from borrowed money.
  • Margin – It is the money borrowed from brokerage firm to buy stocks 
  • Intraday – buying and selling on the same day
  • Open – The order which is not yet executed
  • Order – request you put to buy or sell a stock
  • stop loss – buying or selling a stock when it reaches a certain point.
  • Bull market – upward movement in stock market
  • Bear market – downward movement in stock market.
  • Blue chip stocks – stocks of very large and profitable companies.

Equity Market

Equity represents the shareholders’ stake in the company

Equity means ownership of any business, buying equity shares of a company means buying some ownership in that company.

There are various types of equity, but equity typically means the shareholder equity, which represents the amount of money that would be returned to a company’s shareholders if all of the assets were to be sold off and all of the company’s debt was paid off.

You could think of equity as a degree of ownership in any asset after taking all debts associated with that asset. Investors who hold stock in a company are usually interested in their personal equity in the company, represented by their shares

future_option_stock_market

Future and Option( Derivative Market)

Future and option also known as Derivative market. So what this derivative means, it means any contract which derives its value from underlying asset. In general , for example- crude oil is the underlying asset and diesel and petrol is derivatives.

Types of Derivative Market:

  • Future

  • Option

Future Contract

A future contract is a standardized contract between two parties where one party commits to buy and other party commits to sell, a specified quantity of specified asset at an agreed price on a given future date through exchange.

Option Contract

An option is a contract between two parties under which the buyer of the option buys the right and not the obligation, to buy or sell a standardized quantity( contract size of a financial instrument( underlying asset) at or before a predetermined date(expiry date) at a price decided in advance( excise price or strike price).
So if you enter a option contract you have the right to sell and not the obligation to sell. You have to pay the premium amount to book the option.

Commodity Market

A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold, oil, zinc, aluminium etc. Futures contracts are the oldest way of investing in commodities, like buying a contract for march month. Commodities exchange of India is known as Multi Commodity Exchange( MCX). It was established in 2003 and is based in Mumbai. the clearance and settlements of the exchange in September 2018 was 1.78 billion rupees.

Timings of Commodity market in India

The timing of Agricultural commodities is 10.00 am to 5.00 pm Monday to Friday, where as for non-agricultural commodities the timing is 10.00 am to 11.30 pm in summers and 10.00 am to 11.55 pm in the winters.

Things you need before you start trading

  • Bank account
  • Aadhaar card(The process of opening your trading account will be much faster if your aadhaar card is linked with your mobile number)
  • Pan card
  • Trading account
  • Demat account
  • Brokerage firm( you could choose any firm based on commission they charge per executed order)

 

Some of the best brokerage firms in India( in no particular order)

  • ZERODHA
  • SHAREKHAN
  • ICICI DIRECT
  • HDFC SECURITIES
  • ANGEL BROKING