Online Trading

Here are the most common Online trading FAQ’s.

•    What is the meaning of online trading?

Online trading or internet trading is nothing but the buying or the selling of various securities with the help of internet. It enables any client sitting in any part of the country to conduct and execute a trade with the assistance of the internet.

•    Since when did SEBI allow online trading?

In the year 2000 and in the month of January, SEBI gave the permission to the stock brokers letting them make use of the internet in order to conduct online trading. But this could be done only through the registered stock brokers.

•    Why is online trading preferred to offline trading?

Online trading or internet trading enables a person execute the trading without any time delays and with all the safety precautions needed to execute a seamless transaction.

•    What is the requirement for any stock broker for internet trading?

In order to be able to execute trading through the internet it is mandatory for the stock broker to be registered and have a net worth of atleast an amount of 50 lakh rupees. Other than these eligibility criteria, the broker is also required to have a proper operational system as well as risk management system.

•    What is the requirement for any investor for internet trading?

Online trading makes use of internet for the purpose of trading. Thus you can still execute trading even when you are travelling or are in any part of the country. The only requirement for an investor is an internet connection with any service provider and an access to computer or a PDA or a mobile device which enables you to make use of the internet.

There are a large number of classes, institutes and other private firms which offer online trading courses to all the people who like or want to indulge in online trading. A few of the online trading courses are also offered by several banks at times.

These courses can be taken by anyone from Students, Serviceman, Women, house wives, business men, working professionals, etc. these training courses are either conducted at the training centre or may be made available to you in the form of a module that may be available online through the internet.

The online trading courses are not very expensive to take and have been made quite affordable for the people belonging to the middle class families. A few of these courses are also designed to be conducted as crash courses where basic or preliminary knowledge about the online trading is provided to neophytes or beginners who wish you gain information about online trading,

During this course online training is provided on various topics such as Online trading as well as share trading management, Fundamentals and Technical Analysis of online trading, concepts of day and intra trading, information about mutual funds, the procedures and the documentation of the share market, various options and future aspects, risk ratio, Tips on Online trading, etc.

A large number of online trading courses are regularly taken in various metropolitan cities such as Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangalore and many more which are spread out all across the country. Information about these courses can be obtained either through the newspapers or through the internet. For example, Perfect Academy Training Institute which is situated in Khargar, Mumbai, has one such online trading course.

Online trading software’s are increasingly getting popular these days. You can easily find several online trading software’s on various web sites online. Online trading software’s can either be used by brokers or sub brokers in order to perform the necessary share transactions that they have to. The brokerage generally sees thousands of transactions being made by investors and traders using their online brokerage services and hence there is a need to have an online trading software in place that can cater to the needs of the thousands of investors as well as traders who are wanting to perform online transactions every single day.

Online trading software’s are also used by retail investors like you and me. It is handy to have a software that lets you log on to the internet and tells you about the latest happenings in the market, the price movement of your favorite stocks on the sensex, how the rupee is fluctuating as against the dollar or the euro etc. Such online trading software’s make investing and trading in software’s a very easy job for investors like you and me. Since the investor is not required to go to several web sites in order to get the information that he is looking for and all of it can be found by just using one software, online trading software has become a hit.

Most of these software’s are real time software’s as they carry the information of the market on a real time basis as and when it is happening. Thus the futures market, the bonds market, the options market, sensex, Nifty, essential commodity exchange and even the news regarding foreign exchange is updated at regular intervals on such online trading software’s.

A Mutual fund is a body comprising of group of individuals and analysts who have a better knowledge of the market and therefore these funds are beneficial for small time investors whose budget is very small and also they may not have enough knowledge of where to be investing in. This body of individuals pools in money from short term investors and invests it into stocks, bonds or other securities. The small budget investors generally have small appetite for risk and hence prefer using mutual funds.

Furthermore it is good for the big investors because if these small time investors invest directly in instruments or securities then a time of any disturbances or variations in the market will create panic among these investors and they will draw out their investments from the market. As a result of this, the stock market will effectively go further down where as the people who run mutual funds have better understanding of the market.

Investing In mutual fund is a type of trading because the money which we invest in mutual fund is being used by the lead managers working in this company for investing in various stocks based on their calculations to maximize their profit.

The Mutual funds can be of two types Stock specific mutual funds: – These mutual funds take money from the investors and invest in particular stocks only or there are also Sector specific mutual funds: – these mutual funds invest only In specific sectors only. People can choose a type of mutual fund which suits there needs or the ones which they feel will give them a better return.

A popular form of trading these days is the options trading. In financial terms, an option generally refers to a contract between a buyer and a seller which gives the buyer the right to either buy or sell an asset at a particular day at a particular price which has been agreed upon by the two. But the contract here gives the right and may not be an obligation for the particular person. Because of the right the seller gets a premium from his or her respective buyer.

There is a difference between the call and the put. The call gives the right to the buyer to buy the item where as the put gives the buyer the right to sell that particular asset. There is a long drawn contract between the two parties who are being a part of the options contract. The options contract may generally have the option given to the buyer of the contract, the price at which the transaction is going o occur, the quantity of the assets for which the contract has been drawn and any settlement terms if they need may arise.

Options contracts may be of the following types. Either the exchange option contract which has been done over an exchange and hence is a standardized contract or may be the over the counter contract which is written between the two parties and is not done over any particular exchange. There are several models which are sued to measure the value of the contract like the Black Scholes technique or the Stochastic volatility models. Thus these techniques to a certain extent help in determining the value of the contract.

In the case of futures trading there is generally a contract between one or more parties with respect to when an underlying asset will be bought or sold. The contract generally refers to a time in the future when the asset will be sold at that price. The futures contract will thus have the quantity of the asset, the place where the asset will be sold, the price at which it will be sold and the time at which it will be sold. All futures trading takes place on the futures index. The futures index is the index on which this futures trading occurs. The futures index is thus different from a normal index.

The date mentioned in the futures contract is referred to as the expiration date and indicates the date on which the particular asset might be sold or bought. The futures price will be the price at which this futures contract is going to trade in the futures market. The official price for the futures contract being traded at for that particular day is called as the settlement price of that futures contract for that particular day.

There is a distinction between the futures contract and the forwards contract which must be noted. The futures contracts are traded on the exchange where as the forwards contract is traded over the counter. And the futures contracts are margined where as the forwards contracts are not. Hence the futures contracts have a lesser element of credit risk as opposed to forwards contracts. Futures trading can be done by prospective traders on an online platform.

Sharekhan is a popular online web brokerage house which is accessed by thousands of users every single day. It offers you to trade on the popular stock exchanges like National Stock Exchange and the Bombay Stock Exchange. The important thing about this web portal is that it isn’t just another web portal allowing you to trade but offers several features which may be helpful to the people who are interested in trading or investing in stocks or any other instruments. You need not do a thorough research of the market as sharekhan takes care of that. It offers you the latest news and the happenings in the Market. Thereby indicating investing in which stocks may be good from the point of view of long term or short term profits.

www.sharekhan.com, the portal also offers you your entire portfolio management. Portfolio management refers to the management of all the funds that are there in your portfolio. Portfolio management helps to make the most of your money and also helps when one of the types of investments is going through a bad phase and hence ideally you should be able to diversify your investments through a bouquet of investments so that your net returns are not affected even if one of the investments go bad.

All you need to do is create an account on this web site and log on to it and you may begin trading safely whether it is on the Bombay Stock Exchange or the National Stock Exchange or even the commodities market. It is one of the best portals in India and attracts several visitors every day.

ICICI Direct is a very popular brokerage and web site that allows you to trade in various instruments online. You can access the web site on the following web address.

www.icicidirect.com

You can log on to this web site, create an account and begin trading on any instrument that you may wish to. This online brokerage portal provides a lot of information to all investors and traders. It keeps updating the changes in the National Stock exchange as well as the Bombay Stock exchange.

Whatever be the latest news, events and happenings on the business front that may impact the market or any particular company are updated on the web site and hence investors can go through them before they go about trading. The live market news is also provided on the site.

At the end of the day, once the market has closed for a particular day, the top gainers of the Bombay stock exchange as well as the national stock exchange are listed and so are the biggest losers that are listed on this web site. The web site also offers you tips on which stocks may be the right ones to pick up as indicated by market analysts as well as equity research analysts. This online web site is a complete portal to as it gives all the information that the investor may be looking for. At this web site you will also see the profiling of initial public offers of companies and technical analysis as well as fundamental analysis of companies.

The National stock exchange or the NSE is one of the biggest stock exchanges in the country. Situated in the capital city of Delhi, it has thousands of investors trading on the national stock exchange every single hour. Most of the big companies in the country are listed on the national stock exchange and hence investor can invest as well as trade in them.

The national stock exchange has its own web site which investors can visit in order to find if a specific company is listed on it or not. You can also find any other information relating to investing in companies which are listed on the NSE.

The web site of the Nifty or the national stock exchange is  www.nse-india.com/.

There are more than 850 companies listed on the NSE on which investors can invest in. You can do online trading on the national stock exchange through any of the brokerages that you want to. There are several online brokers and portals as well through which you can do online trading.

There are in all 850 trading members associated with NSE which provide trading in over 1000 equities 2500 debt securities. It also provide trading platform in derivative instruments like index futures, index options, stock futures and stock options. The National stock exchange provides an on line trading facility for its investors as well as traders. This trading facility is called National Exchange for Automated Trading (NEAT). It is similar to the facility offered by the Bombay stock exchange referred to as the BOLT.

Commodities can be of several types like energies, meats, grains, financials etc. Trading in commodities, stands today as a very lucrative profession. The exchanges in India that allow you to trade in commodities are the following,

•    Bhatinda Oil Exchange Ltd. (Bhatinda)
•    The Bombay Commodity Exchange Ltd. (Mumbai)
•    The Rajkot Seed oil & Bullion Merchants` Association Ltd (Rajkot)
•    The Kanpur Commodity Exchange Ltd. (Kanpur)
•    The Meerut Agro Commodities Exchange Co. Ltd. (Meerut)
•    The Spices and Oilseeds Exchange Ltd. (Agra)
•    Ahmedabad Commodity Exchange Ltd. (Ahmedabad)
•    Vijay Beopar Chamber Ltd. (Muzaffarnagar)
•    India Pepper & Spice Trade Association. (Kochi)
•    Rajdhani Oils and Oilseeds Exchange Ltd.  (Delhi)
•    National Board of Trade. (Indore).
•    The Chamber Of Commerce, (Hapur)
•    The East India Cotton Association (Mumbai).
•    The Central India Commercial Exchange Ltd. (Gwalior)
•    The East India Jute & Hessian Exchange Ltd (Assam)
•    First Commodity Exchange of India Ltd (Kochi)
•    Bikaner Commodity Exchange Ltd. (Bikaner)
•    The Coffee Futures Exchange India Ltd. (Bangalore)
•    E-sugar India Limited.
•    National Multi Commodity Exchange of India Limited.
•    Surendranagar Cotton oil & Oilseeds Association Ltd,
•    Multi Commodity Exchange of India Ltd.
•    National Commodity & Derivatives Exchange Ltd.
•    Haryana Commodities Ltd. (Hissar)
•    e-Commodities Ltd.

The major indices for commodity trading are MCX, NCDEX and NMCE.  MCX is the largest index as it involves a huge volume of trading. More details about MCX and NCDEX are given below on the following web sites. These web sites will offer you all the information relating to the various commodities which are traded on these exchanges.

www.mcxindia.com/

http://www.ncdex.com/aboutus/index.aspx