Starting to think about trading in stock market? Don’t know anything about shares and share market? Eager to learn the basics, Worry not as we give you the complete step by step guidance on how to make an entry in the world of Sensex and NIFTY to start a fruitful journey towards financial freedom.
First Thing First: Open a Trading Account aka Demat Account
If you want to trade stocks, you’ll first have to open a trading account. This trading account is called as Demat Account (Dematerialized account). Demat or Dematerialized account is opened when you, the investor/trader registers with any registered broker at NSE/BSE so that you can buy and sell securities. Here you can trade both in NSE i.e. National Stock Exchange – NIFTY or BSE i.e. Bombay Stock Exchange – SENSEX. While, you can trade in either of two exchanges, it is highly recommended that you trade in NSE because the turnover here is more. You can trade any Stock in NSE. The total company listed in NSE are 600. However, we would suggest you to trade in most liquid stock as they are traded in crores on daily basis. We recommend three stocks Reliance Communication (Scrip Name – RCOM), JP Associates (Scrip Name – JPASSOCIAT) and/or Unitech (Scrip Name – UNITECH)
The market opens at 9.15am and closes at 3.30pm from Monday to Friday. The market is closed on Saturday and Sunday and also on all the 15 gazetted Indian holidays.
If you trade for intraday, you have to wind up (technical term – square off) as per your broker’s square time. The square off time ranges from 2.45 pm to 3.20 pm. In case, you do not square off within this time frame, the broker will square off on your behalf at the current market price.
For opening a Demat Account you require just 2 Documents –
PAN CARD and
A Saving Bank Account with a Bank Statement of 6 Months
Plus, an email id, a mobile number and two passport size photo
In case your bank account is not 6 month old, and you are not in a position to give the broker 6 months bank statement, don’t worry! You can still trade in Intraday (MIS) and Delivery (CNC), but not in Options and Future. Intraday is a type of trading where you buy and sell shares on the same day. In Delivery, you may buy today but sell on a later day, that can be tomorrow, day after, few months or even few years.
How to Choose an Investment Broker: Open your Trading Account With a Broker With Very Little Brokerage Rates
You might have heard several names including Reliance Securities, ICICI Direct, Kotak Securities, India Bulls Ventures (earlier Indiabull Securities), HDFC Securities, SBI Securities (SBICAPSEC), and ShareKhan. Well, these entities are nothing but brokers registered under the regulatory body – SEBI (Security and Exchange Board of India).
These big names are quite alluring, however with big name comes big price as well. Like, you guessed it the brokerage rates of these companies is very high. As a trader, I have been trading from quite some years now, and have spent a huge amount of my capital in ‘just’ brokerage.
When I couldn’t afford them anymore, I went on a “Cheapest Brokerage Company” spree so that I could spend very minimum on brokerage. This is the time when I came across two brokerage companies. These two companies were/are not only cheap, but also sustainable
VNS Finance and Capital Services Limited
Based in Andheri, Mumbai, VNS Finance came to my rescue when the major chunk of my profits went into the broker’s pocket.
Here, I shall share with you VNS’ brokerage fees:
Intraday (MIS)
Rs. 7 per Lakh on Entry (Whether you Buy or Sell any Stock) + 14.0% ST which goes to the government
Rs. 7 per Lakh on Exit (Once you buy you need to sell the stock and exit the transaction. In intraday you can even sell the stock first and then buy the same stock later) + 14.0% ST which goes to the government
After this, you will have to pay Security Transaction Tax, Stamp Duty and all other taxes at the rate of Rs. 36 per Lakh only, on the selling amount. These taxes do not apply on Buying.
Or their next plan
Rs. 14 for any amount on Entry (Whether you Buy or Sell any Stock) + 14.0% ST which goes to the government.
Rs. 14 for any amount on your Exit (Once you buy you need to sell the stock and exit the transaction. In intraday you can even sell the stock first and then buy the same stock later) + 14.0% ST which goes to the government
Or their next plan
A fixed sum of Rs. 1899 per month (excluding taxes) on entry as well as for exit. This is for any number of trading, and for any amount of trading.
Please note that the Security Transaction Tax, Stamp Duty and all other taxes is at the rate of Rs. 36 per Lakh only, on the selling amount. These taxes do not apply on Buying.
Another Investor Friendly Broker in Trading Is Zerodha – The Discount Brokerage
Traders love Bangalore based Zerodha because this broker is very budget friendly. What’s more, it is India’s first broker who offered the lowest and cheapest brokerage rates. Here I’ll share Zerodha’s brokerage rates.
Intraday
Rs. 10 per Lakh on Entry (Whether you Buy or Sell any Stock) + 14.0% ST which goes to the government
Rs. 10 per Lakh on Exit (Once you buy you need to sell the stock and exit the transaction. In intraday you can even sell the stock at first and then buy the same stock) + 14.0% ST which goes to the government
After this, you will have to pay Security Transaction Tax, Stamp Duty and all other taxes at the rate of Rs. 36 per Lakh only, on the selling amount. These taxes do not apply on Buying.
Or their next plan
Rs. 20 for any amount on Entry (Whether you Buy or Sell any Stock) + 14.0% ST which goes to the government
Rs. 20 for any amount on Exit (Once you buy you need to sell the stock and exit the transaction. In intraday, you can even sell the stock first and then buy the same stock later) + 14.0% ST which goes to the government.
After this, you will have to pay Security Transaction Tax, Stamp Duty and all other taxes at the rate of Rs. 36 per Lakh only, on the selling amount. These taxes do not apply on Buying.
Besides, if you trade with Zerodha you will also have to pay a nominal Karnataka Govt tax with every trade.
Let me tell you the brokerage rates of all other big brokers as mentioned above like Reliance Securities, ICICI Direct, Kotak Securities, India Bulls Ventures (earlier Indiabull Securities), HDFC Securities, SBI Securities (SBICAPSEC), and ShareKhan are more than seven times above Stock Rs. 40 and more than Rs. 20 times for stock less than Rs. 40 per share.
Some of these BROKERS might even keep FDR of Rs. 2500 to Rs 25000 or more to reduce your brokerage rate. However, please note the fact that this fixed amount gets exhausted very soon if you trade on a daily basis, which means you’ll have to renew it time and again.
You may now wonder –
Whether new companies like VNS Finance and Zerodha are safe for trading?
Often people ask questions like – “Will my money be safe with these new companies? What if I do not get my money back?” and this makes them invest their money in popular sharks like ICICI, Reliance, HDFC, SBI. However, you need to first understand the fact that all these brokers are registered with SEBI, and every penny that you invest is safe. Don’t go on advertisement and popularity.
Zharoda may not be that popular among the masses, but let me tell you that in just 4 years the company has reached great scales because of its, reliability and services. The company’s alexa rank in India is under 2000(lesser the better) which is much much better than these popular names – giving you a clear picture as to why running behind the popular name is not in the Investor’s interest.
What’s more the margin (the money which is given to you on the basis of your capital for trading) given by these financial brokers is way more than these companies. While, Zerodha gives six times to 20 times margin on your capital and VNS gives 6 to 10 times margin for Intraday trading, all others give only 5 times and some even 4 times.
Why I Insist on VNS and Zerodha?
Because as a trader, I have learnt very hard way and have lost a lot of capital in just brokerage while dealing with these popular brands which you are aware of. Not just me, there is one Mr. Bharadwaj who paid more than Rs. 45 lakh to these companies as brokerage. At last, he shifted to Zerodha, and today, he is earning anything between Rs. 1.5 and 2 Lakh per month with an investment of Rs. 50,000 only. He withdraws his profit money on a daily basis i.e whatever money he earns above 50,000.
Now that you know where to open your account, let me tell you that you don’t have to go anywhere to open your account.
All you have to do is, give them a call. Either a representative will come at your doorstep or the company will provide you the link to download their form online which you might have to download and post them, after filling it.
You will also have to pay the charges of opening the Demat account. This charge is anything between Rs. 400 to Rs. 900. While, some brokers might take 15 days to open your account, Mumbai’s VNS Finance takes only 24 hours after they receive your completely filled form.
And once, you get verified, you can start trading with an investment of amount of rupees as there is no minimum or maximum limit.
Now, the question is how will you transfer the trading amount from your Bank Account to Demat Account
Well, you can payin the amount either by Internet Banking or through cheques. While, internet banking can be instant or may take maximum of 3 hours, cheque, as you know will take time. In case, you earn profit and you want to withdraw your money (transfer the money from your demat to savings) you can do it on any day.
However, let me tell you when you sell any share the money will reflect in your account only after 3 days i.e. including the day the transaction happened. You can withdraw any amount of money starting from Rs. 100. If you request for withdrawal of your money before 4 pm today, the same will be transferred in your Saving Account next day before 5pm.
This is all you need to know on how to start trading in share market. In my next article, I’ll focus on Intraday trading. Mind you Intraday trading is not that risky!
Have a look at the summary of my next article – If you trade in Intraday and buy a share at Rs. 19.25 and sell at Rs. 19.30 with VNS or Zerodha, your total expenditure for that trade will be 1 paisa for brokerage (STT etc complete) and balance 4 paisa will be your net profit. And if you sell in 19.35 your profit will be 9 paisa. Similarly, if you trade a share of Rs. 38 per share then your total expenditure for Buy/Sell will be around Rs. 2 paisa per share in all, and the rest will be your net profit. So on and so forth. You can yourself calculate your expenditures and profits as per your plan of brokerage.
Trade Intraday Confidently.
Happy Trading!
