Trading online has become very popular in today’s time when you just need a trading account and after that you can trade comfortably while sitting at your home. Apart from comfort of trade it provides various facilities like:

• Ease of buying and selling of shares.
• Online receipt of contract notes/ trade statement for the transactions.
• Direct deposits of dividends/ bonus amount etc to account.
• Various trading tools for ease of making investment decision.

One click of mouse button is of ample importance while trading online because sometimes it is what that draws a line between your winning or loosing the game. Trading online is very interesting but you have to be a bit careful as well. The process of trading is very easy but making money is a bit tricky. All you need is a trading account and a little bit of caution to operate the same. Below are some do’s and don’ts while trading online:

Prices change at the blink of eye and the transactions are not always in real time. Moreover the speed of your internet might cause delay. So always make sure not to change your decision until the last moment. Take time examining the stock and make decision ahead of time so that you don’t loose while in panic.

An important feature of stock markets is volatility. So if you don’t keep a close eye on how your stocks move while placing an order, you might land up in losses.

Online trading is a matter of trust between you and your broker because there is no in-person contact. But you can’t leave everything on trust. Make sure your broker provides you detailed email statements and contract notes of executed trades.

Online trading provides facility to place limit orders. If you don’t have sufficient time to keep track of the stock prices, fix up a buy/sell price based on your judgement and go for limit orders. Moreover limit orders help you take ample advantage of volatile session during the day.

In addition to the brokerage rate being paid, prudent investor should always be well aware of the various Fees and commissions charged by the broker for various services offered like Mobile services, buy sell alerts, reporting, chart and other tools to facilitate easy trade as they really affect your net earnings.

For novice traders, it’s a suggestion to always trade with stop losses. Set your stop loss to level to avoid the risks associated.

Even though chances of default by a good brokerage firm are nil but a smart investor should always keep track of credit/debit of money in their bank accounts or transfer of shares to/from the demat account accordingly for each trade executed because technical reasons might lead to discrepancy which cannot be avoided.

Prevention is always better than cure. Security is another important factor for online traders. It is advisable always to follow security measures related to passwords and other personal information while login into the websites to eliminate chances of theft of identity and information.

RENUKA KINGER

Day trading conditions the most intense approach to stock market trading. To be on top of the fluctuations in stock prices, day traders spend hours together in monitoring the market. Day traders could make dozens of trades any day, sometimes in a matter of minutes hoping to grab the wave of price change. They avoid the risks of long term buy and hold. Day trading could be exciting, the fast pace attracting risk takers. Yet this strategy for stock market trading is only effective for day traders, who apply analysis rather then emotion to trading decision. Savvy day traders could turn profits quick. Emotional traders usually lose fast and leave disenchanted.

Swing trading uses a slightly longer time horizon than day trading, watching a stock for weeks or months before trading. This type of stock market trading relies on careful monitoring of fundamental and technical analysis. Swing traders often specialize in a certain business or industry so that they become experts in the movement within those stocks. They also have more time to study the company financial reports and industry forecasts. Since swing trading does not require hours of daily monitoring, it is a good strategy for the trader who wants to make money from stock market trading without turning it into a full time job. Even the study of reports could be done during the daily commute or lunch hour so that the swing trader stays well informed.

Position trading works well for investors who want to be involved in the stock market trading, but run short of time. Stocks are being held for months awaiting any changes in the trend. Position traders keep up with the fundamental and technical analysis as well as news events but apply a long term strategy to their stock market trading.

Market order: When you put buy or sell price at market rate then the price gets executed at the current rate in the market. The market order gets immediately executed at the current available price.

In market order there is no need to mention the price; the shares will get executed at the best current available price.

If you wish to buy or sell shares at any specific price, i.e. market order is not suitable for you then you have to go for limit order.

Market order is for those who want to buy or sell immediately at the current available price.

Limit order – It’s totally different from market order. In this, the buying or selling price has to be mentioned and when the share price comes to that price your order will get executed at the price mentioned by you.

But here it’s not sure that the price will come to your limit order.

In day trading it’s risky because you have to close all your transactions before 3.30 pm and if in case the price doesn’t reach to your limit order, your order will be open and then you have to go through (bare) heavy penalties. Importantly, limit order and stop loss trigger price are used together.

Stop loss trigger price: Stop loss and trigger price are used to reduce the losses. This is a very important term especially if you are day trading (intraday). Stop loss, as the name indicates, is used to reduce the loss.

You can use a pivot calculator for simple stop loss calculation for delivery based trading and intraday stop loss depends on how much you are ready to lose – the maximum amount you are ready to lose- it also depends on the price movements of the scrip for that particular day

Source : Various

While concerns about online security will always be there, rest assured that the brokerages themselves have a very, very high stake in making you feel comfortable about the level of security being used. All online brokerages have a portion of their website devoted to explaining the measures they employ to protect your transactions.

Here are a few questions that you may have regarding Online Trading in Stocks.

Is trading through the Internet safe?

The safety of transactions on the Internet depends on the encryption system used. The better this transaction system, the more difficult it is for any person to hack the site. Internationally, the best system available today is the 128-bit encryption.

Secondly, you too can ensure the safety of the transactions online. You normally get a secured user id and password, the secrecy of which is to be maintained entirely by you.

Thirdly, if the transaction system requires no manual intervention, you further improve the safety in the transactions. Among Indian sites, very few are fully integrated online trading sites. This enables the elimination of the possibility of any manual intervention, which means orders are directly sent to the exchange ensuring that you get the best and right price.

Is trading through Internet Difficult ?

The experience of trading through Internet depends a great deal on the type of product offered by the site. Say, for example, one of the issues bothering you may be getting tired of the paperwork involved after every trade, in writing cheques.

In online trading sites, the greater the back-end integration of the system, the greater the amount of work the sites do for you, therefore greater the convenience available to you.

In big financial institutions your broking account, bank account and Demat account are linked electronically. So when you punch in a buy or sell order, the system checks the funds/shares availability and automatically credits/debits the accounts once the order is executed by the exchange.

Is trading through Internet a costly affair?

The convenience provided by online trading is even then worth the costs involved.

And online trading sites are not that costly. For example, a trader can trade shares on margin at rates as low as 0.10% and if one wishes to trade in cash, then the rates applicable are as low as 0.4%.

However, it is important to compare various online trading sites on brokerage rates, inclusive of all sub-charges.

I am pretty satisfied with my present broker who serves me off-line. Why should I choose to go online to trade shares?

Many of those customers who have chosen to trade shares online today, had at one point of time been trading through offline brokers, just like you are today. They took a chance to go online and trade shares. After realizing the advantages of trading shares online, they have shifted to online trading now. Just try trading shares after opening an account with any online trading site. However, before choosing an online trading site, please compare all such websites and then make a decision.

How frequently are the prices updated at all these online trading sites?

The tickers available at online trading sites provide instantaneous updates. Also, some websites can offer to transact in those shares instantaneously and with convenience.

How can I be sure that I shall be trading at a price I want to or at a price appearing in the website?

The solution to your problem could be provided in different ways by different online share trading sites. For any trade order, the customer is asked to click ‘Proceed’ after he has the opportunity to completely check the order verification form.

Moreover, you have the option of modifying or canceling the order till the moment the order is executed at the exchange.

Finally, online trade confirmations reach our customers within 4 minutes, while contract notes are dispatched at the end of the day and reach within 24-36 hours.

What other services can I get by trading shares online?

Internet has brought to the retail investors what was till sometime ago the sole prerogative of large brokerage houses and high net worth individuals.

In the era of capitalism, with arguments of whether socialism would take over, emerged the concept of stocks and hence stock markets. We were always familiar with the bonds that the government issued against a certain security it provided us, which we often term as deficit financing. It is now applicable for the private industrialists as well, when they want to accrue capital and they are running short of funds. They fly shares, some of which are collectively called stocks and they collect money against the shares that you hold. This way you actually own up the company even though just by bits and pieces. Your money, of course is a risk of undergoing a loss if the company loses profit. However, the chances of gaining profits are not very less either. Often shares are termed as risky assets, which can yield very high returns. You could say it acts almost like an insurance market when it comes to risk spreading.

As many seem obvious to you, unless you know your way through the stock market, you might end up losing money. Stock market, as the common notion goes, is not gambling for money. It is rather pure mathematics and what we call in statistical terms, econometrics. So, when you are new to stock market investing, trying to find your way out, you indeed could do with the help of a stockbroker, who know the principles of how the market will work for a set of political and financial developments. And once you know your way about the market, you could do with discount brokerages, which charge you a lot lesser than the traditional stockbrokers in lieu of providing you with lesser advices. Discount brokerage allows you to take your own decision with little or no help from the stockbrokers as per your preferences.

If you want to trade stocks or buy and sell financial assets within the same day, what you do is day trading. With Internet making the world a smaller place, the concept of online stock market trading has come up to be very popular. You can undertake online stock trading when you want to trade stocks without being fooled into buying a certain stock or selling one, doing directly to the market. This is where discount stock trading could help you from losing money for nothing. It provides you with an opportunity for the cheapest stock trading. Many casual traders are now into the scenario of day trading due to improved Internet options, changes in legislation and advanced technology. Traditionally though, day trading was the nook for financial firms, investors and speculators.

Discount stockbrokers allow you the flexibility of creating your own portfolio, sharing your money between mutual funds, bonds, stocks, options and exchange traded funds. Most of the companies that are into discount brokering, allow the options of banking like checking and savings accounts, credit cards, certificate of deposits and mortgages and money market accounts. Such companies offer you options of the best online trading.

Short Selling

Looking at the flow of shares in above flowchart, one would ponder why to borrow shares for selling in market and then transfer them back to the lender? The logic behind shorting is very simple; earning profit margin. Let’s see how??

If you think a stock is overvalued and expect that the price would come down in future for sure; you would wish to sell the shares at current levels at higher price. So you borrow the shares and sell them at higher price. And when the stock actually falls as you had speculated; you buy it from market at lower price and return it to the lender and the difference between the selling price (higher) and buy price (lower) is what you earned in the deal. So at the end you must close the short by paying back the shares and this is called as “covering the short”. Concluding this, investors who anticipate fall in the stock price go short to take advantage of market fall. An investor can hold the short for as long as he wants but he is charged an interest as it is similar to a loan taken in the form of shares. Also if during the course of loan, the company declares dividend or rights issue, it must be paid to the lender who is the actual owner of shares because you are just a borrower.

Short selling is considered to destabilize markets directly or indirectly. In 2001, the stock prices crashed heavily owing to short selling by big operators after which SEBI banned it. After a gap of 6 years in December 2007 SEBI came up with updated norms of short selling to cover the loopholes and ultimately institutional investor were also permitted to short sell.

Concluding this, short selling no doubt gives you an opportunity to earn profit by taking advantage of downturn of markets, it might bring in huge loss to your investment if stock price moves up. Because in real sense, shorting is a bet against the current market trend. When stock is at current higher levels, you are expecting it to fall down and entering the arena. Speculation is what makes shorting a riskier job. So beware of the dark side of shorting before you actually go for it!

All the Best

Renuka Kinger

Day Trading is the act of buying and selling securities intra-day with the expectation of making fast profits within minutes to hours. Popularized during the bull market of the late 1990s, day trading is the practice of buying and selling stocks over a very short period of time, typically one day. Once the domain of floor traders and investment banks, the availability of inexpensive computers and fast Internet access has brought day trading to the masses.

Day traders come in all shapes and forms, using mechanical to systematic day trading systems, and can place anywhere from one to thousands of trades per day.

Day trading strategies typically follow one of two approaches: beating the spread or attempting to catch short term trends. The spread is the difference between what is being offered for a stock (the bid) and the price being asked for the stock (the ask). Spread trading attempts to buy at the bid and sell at the ask, over and over again. Spread traders may make hundreds or even thousands of such trades a day. With the advent of spreads as low as one penny, spread trading has become much less profitable than it once was.

Counter-trend traders will look for signs that a stock is topping or bottoming out before they place a trade in the opposite direction. For example, reversal traders use tools such as the TICK, TICKI, Put Call Ratio, volume, etc. to anticipate a change in trend.

The term “day trading” is a widely misused and misunderstood term. Real day trading means not holding on to your stock positions beyond the current trading day; in other words, not holding any position overnight. This is really the safest way to do day trading because you are not exposed to the potential losses that can occur when the stock market is closed due to news that can affect the prices of your stocks.

Unfortunately, many people who claim to be “day trading,” hold stocks overnight because of fear or greed, thus setting themselves up for the catastrophic elimination of their capital. When day trading currencies, the term “day trading” changes slightly. Since currencies can be traded 24-hours-a-day, there is no such thing as “overnight” trading. Thus, you can have open positions for longer than a day with active stop losses that can be activated at any time.

Day trading is an investment tactic that does online daily stock trading with a relatively short investment. Those who do day trading usually buy and sell securities during the same market day and, as a general rule, do not hold stocks overnight. Many day traders make dozens of trades every market day hoping to capture profits that arise from small intraday price fluctuations..

You basically watch the stock market all day long, buy and sell multiple times throughout the day, trying to buy it low and selling it high and then rebuying it when it drops back down, etc. Very dangerous, and hard to do. Studies have shown day traders do worse in the long run than buying stocks and holding onto them for longer terms. Plus you have to pay commission or fees every time you buy and sell, and taxes on your capital gains are higher for stocks held for less than a year.

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