Basics of Stock Market

In this article, I will give you an overall idea of the stock market and how a normal person can play the game of buying and selling stocks.

Stock

Let’s start with what really is a stock.A stock is nothing but a share in the ownership of a company.For example, if a company’s ownership is divided into 100 parts and you being an investor own one part or buy one share out of 100 then you will become 1% owner of that company.

Stock Market

The next is stock market or the stock exchange.It is simply the marketplace where stocks are bought and sold.In older times traders had to be present in the exchange to buy and sell but with today’s technology, with the advancement of electronic media all the transactions are done electronically and no one is required to be present physically in the stock exchange.The two exchanges of India are NSE(National Stock Exchange) and BSE(Bombay Stock Exchange).

Indices

There are two major indices in India the Sensex and the Nifty

Sensex  

The Sensex is the market index for the Bombay Stock Exchange(BSE) and consists of 30 companies stocks.These 30 companies are one of the biggest and most actively traded companies of India.

Nifty

The Nifty is the market index for the National Stock Exchange(NSE) and consists of 50 companies stocks.The majority of the trade happens through NSE and NIFTY today is the indicator to Indians and foreigners that how well is our economy doing.

Now the next question that must be popping up in your mind is how these indices fluctuate, or how the prices of a stock show a roller coaster ride?

Well, for now, I will simply say it is governed by the sentiments of the investors.The stock prices fluctuate on the basis of two emotions that is greed and fear.To know more about how the market works click on How stock market works.

Bull & Bear

Now let us understand two very common terminologies, Bull and Bear market.

Bull Market: A bull market implies an upward movement in the indices when prices are expected to rise.

Bear Market: A bear market is just the opposite of the bull market.A bear market implies a downward movement of price or indicates price fall in the stock market.

SEBI

Now that you are familiar with the basic terminologies of the stock market, you must be curious to know that, is investing in the stock market safe or not, which is a very crucial factor to learn.

The answer to this question is SEBI that is the Securities and exchange board of India.The SEBI is the watchdog of the Indian stock market.SEBI’s the basic function is to protect the interest of investors like you and me in the stock market, to promote the development and to regulate all matters connected to the securities market.For more information visit www.sebi.gov.in/sebiweb/.

Take off

The stock market is safe and it can give you a high return on your investment.What are you waiting for????????

Let’s get started on the journey of becoming rich………..

The prerequisites to invest in the stock market are having a Demat and a trading account.Just like you need a bank for savings and other financial transactions, you need a Demat account and a trading account to buy, hold and sell shares.A Demat account is one where your shares are stored in an electronic form that means you do not need to manage any physical paper certificates.A trading account is an interface between your bank and Demat account for buying and selling shares.

The main difference between a trading account and a Demat account is, the trading account is used to buy or sell stocks whereas Demat account acts just like a bank where shares bought are deposited in, and where shares sold are taken from.

Now that you are armed with the basic requirement of the stock market you are ready to get into the market and trade.Before getting into the subsequent posts for in-depth analysis of market I would like to give you a small example sighting how the selling and buying of stocks happen.

Suppose you have bought a share of Reliance worth Rs 100 and you have targeted to sell it at Rs 105.You also don’t want to lose more than 10% of what you have invested, so you put a stop loss at Rs 90.Now, after few days the price of the stock touched Rs 105. So what do you do?? You request a sell order through your broker.This order will only get executed when someone will be willing to buy one stock of Reliance at Rs105.If the exchange gets a perfect match then your order will be executed and you will get your money credited to your account after 2 days as the exchange works in T+2 settlement cycle.This means that your money will be credited two working days after the day the trade takes place.

To get a better insight in stock market click on Stock markets.

To get the strategies to invest in market Click here

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