Stock, Stock Market and its Processes
4What are Stocks
4Different Types of Stocks
4How Stocks Trade
4What makes Stock Prices to Change
4How to do Buying and Selling of Stocks
4Terms Related to Stock and Stock Market Trading
4What is Nifty and Sensex
3. Method of stock issue-  Preferred and common stocks.
Common Stocks -
When people talk about stocks then they mostly refer to common stocks. Common stocks are stocks that offer you a bit of ownership of a company which is called a share holder. So this makes you eligible for companies profit and loss. If company makes profits then it may return back to investors/share holders in term of dividend (its companies decision whether to pay dividend or not). Some companies reinvest there profit in expansion, takeovers, new product launch etc. 
Investors get one vote per share to elect the board members.

Preferred stock

As common stocks provide variable dividends, preferred stock provide fixed guaranteed dividend.
With preferred shares, investors are usually guaranteed a fixed dividend forever. If the company goes bankrupt, stocks holders holding preferred shares gets faster access to any assets not used towards paying debts.
People holding preferred type of stocks usually have no voting ability and these stocks only get their pre-determined dividend and not more than that.


How Stocks Trade
The stock market is the place where buyers and sellers meet (not physically but online) and decide on a particular stock price and carry out buying and selling.
Nowadays buying and selling takes place online with the help of computer where trades are made electronically from anywhere as long as your computer is connected to internet. Now days no physical floor trading takes place.
Further stock markets are classified into two types
Primary market and Secondary market.
The primary market is where shares are created (by means of an IPO). So in primary market company issue an IPO and investor purchase it, while in the secondary market, investor’s trade previously-issued shares without the involvement of any companies.
The secondary market is what people are referring to when they talk about the stock market trading.
 
What makes Stock Price to Change
Basic factor to change the stock price is demand and supply. If more people want to buy a stock (this is called demand) than sell it (this is called supply), then the price moves up and in exact reverse way if more people wanted to sell a stock than buy then the price would fall.
Following are the important factors and points why stock prices move up and down.
- The variation in buying and selling quantities makes the stock price move up and down.
- If more people are willing to buy and few people are willing to sell means there is more demand (buyers) and less supply (sellers) which would make the stock price to increase.
- If more people are willing to sell and few people are willing to buy means there is more supply (sellers) and less demand (buyers) which would make the stock price to decrease.
There could be any reasons why some people want to buy and why some people want to sell the same stock. Some are listed below.
- News related to company that may be positive or negative. Positive News like major take over’s, mergers, acquisitions, negative news like low profit and sales figures declaration in quarter or annual results.
- Some people trade on technical charts and buy and sell on different prices.
- Some people make move on fundamental ratios/factors so this type of trader buy and sell on different prices.
- Some people enter into market just looking the buying and selling figures(these are called as volumes) and this type of trader have there different prices to buy and sell.
- Some trader buy and sell based on news.
So over all different people across the globe have different trading strategies due to which stock prices move up and down.

After reading above paragraphs you might have got information about what is stock, what is stock market and how stock prices move up and down?
If you need any further guidance then you can write back to us.
How to do Buying and Selling of Stocks
Now we will see how to do transaction (means buying and selling) of shares.
Nowadays there is no any physical trading, means going physical to stock exchange and do buying and selling of shares. Now everything is done online in electronic format .No need to go to any stock exchange.
Stock transaction takes place in 3 major steps.
1. You place order (buy or sell) online -
2. The order goes to your broker (broker like indiabulls, 5paisa etc)
3. From broker the order goes to stock exchange (either BSE or NSE)
And finally based on your price your order gets executed.

Now let’s see what you have to do for placing orders.
Your role is to place only buy or sell order. No need to worry about broker part and stock exchange part. You just need to place your order.

There are two methods for placing orders.
Online trading and Offline trading.

Online Stock Trading
- The online stock trading is done by self. If you want to do trading yourself then you can go for online trading.

For online trading you need computer, Internet connection, demat and trading account. You can even make use of internet café, if you do not want buy computer and internet connection at the beginning.  But demat account and trading accounts are must for trading in stock market.

Offline stock trading - In this method the orders will be placed by the broker on your behalf. Means you have to tell your broker which stocks to buy and sell and based on your instruction he carries out transaction.  In this method you don’t need any computer and internet connection.

More details about online trading
Lets see what all the things you require if you want to start the online trading.
Computer - Now days due to high competition computers are available at very good price. Depending on configuration the prices vary from RS 11,000 to 25,000.
For stock market trading there is no need for any high configuration computer.
Internet Connection - Again due to high competition between Tata broadband, Airtel, BSNL, MTNL, Reliance and lot more the prices are very low.. The starting range for broadband connection varies from Rs.250 to 950 per month. So you can go for mid priced connections.
Opening Demat account and trading account - Demat account is must if you want to do stock trading or investment.
Use of demat account - Demat account is used to keep your stocks in electronic format. Now days as there are no any physical shares in paper form, everything is stored electronically so Demat account is required.
Trading account - Trading account is required to do buying and selling of stocks.
In today’s markets there are lots of brokers with whom you can open the account. Few are listed below.
www.sharekhan.com, www.motilaloswal.com, www.5paisa.com, www.indiabulls.com, www.reliancemoney.com, www.anandrathi.com, there are lot more.


Points to remember while opening the Demat and Trading account -
I. First Very Important - Fast Support - Check for there support. How fast they respond when you contact them through email or through phone. It’s very important that they should respond to you very fast. So that your problem should get resolved at the earliest or they should be able to place orders on your behalf if in case your computer or internet stops working or they should respond to your queries as early as possible.

II. Second Very Important - Brokerage rates- Confirm and go for low brokerage rates. Later if you show good transaction, means good buy and selling volumes, then some brokers reduce the brokerage rates.

III. Check the reliability - Check reliability and how easy is the trading platform. Trading platform is where you put buy and sell order,  where you can see your pending orders and executed orders, etc. Even you can request the brokers to show the demonstration of there trading platform and after viewing and verifying it you can go for that broker and open trading account.
In addition to brokerage you also have to pay taxes on every trade. The taxes will be same with all brokers.

Please have a look on following different taxes.
Note 1 - Regulatory charges are calculated on total transaction (buying and selling), which is also called as total turnover amount.
Note 2 - You have to pay service tax onlt on brokerage.


Finally after getting your demat and trading account you can request the executive of your broker to explain live (practically) how to place buy and sell order, how to check the pending and executed orders and lot more so that you can get familiar with the trading platform and do it yourself successfully.

For further guidance you can contact us use “free advice page” from navigation bar.


Terms Related to Stock and Stock Market Trading
Open - The first price at which the stock opens when market starts in the morning.
High - The stock price reached at the highest price level in a day.
Low - The stock price reached the lowest price level in a day.
Close - The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day.
Volume - Volume is nothing but quantity of shares.
Bid - The Buying price is called as Bid price.
Offer - The selling price is called offer price.
Bid Quantity - The total number of shares available for buying is called Bid Quantity.
Offer Quantity - The total number of shares available for selling is called Offer Quantity.
Buying and selling of shares - Buying is also called as demand or bid and selling is also called as supply or offer.
Short selling - First selling and then buying only happens in day trading or future trading
Share Trading - Buying and selling of shares is called share trading.
Transaction - One cycle of buying and selling of stocks is called One Transaction.
Squaring off -
This term is used to complete one transaction. Means if you buy then have to sell (means square off) and if you sell then you have to buy (means square off).                        

Limit Order - The order get executes at your mentioned price.
Market Order - The order rate gets executes at current market rates.
For example if you place buy order at market price then the price will get executes with the current available offer price and when you place “sell market order” then your order get executes with current available bid price.

Conclusion - The market orders get immediately executed at the current available price while limit order will execute when the market price will reach your mentioned price.
Stop Loss Order price -
An order placed to sell a share when it reaches a certain price. It is used to limit an investor's loss.
Stop loss order is used with limit order. It is mostly used by day traders.

For example -
Suppose you bought XYZ shares at Rs 100 and unfortunately the price starts falling so to protect your loss you can make use of a stop loss and put sell limit order of 95 with stop loss of 96. So if price starts falling and touches 96 then your order get executed and all your shares will get sold in between 95 to 96 and you will get protected from further decrease in price. So in short stop loss will be used to protect your heavy loss.

Disadvantage - The stop loss may also get executed by short term fluctuation. 
What are stocks
In simple language a STOCK is a share in the ownership of a company.
Being a stock holder you have a contribution towards company's assets and earnings.

If you buy more stocks of a particular company then your ownership stake in that company becomes greater.
The world “stock” is called by different names with different people like share, equity, scrip and so on but all these words have same meaning.



Different types of stocks
There are various ways the stocks are categorized
1. Based on size of market capitalization - Large cap, Mid cap and Small cap
2. Depending on sectors - Banking, Pharmacy, IT, Telecommunication.
3. Method of stock issue- Preferred and Common stocks.
The explanation of these methods is as below.

1. Based on size of market capitalization
a) Large Cap Stocks - Companies having market capitalization over Rs.1000 crores.
    The stocks of such companies are called Large cap or heavy weight stocks.

b) Mid Cap Stocks - Companies having market capitalization between  Rs.100 crores
    and Rs. 1000 crores. The stocks of such companies are called as Mid cap stocks.

c) Small Cap Stocks - Companies having market capitalization less then Rs.100 crores.
    The stocks of such companies are called as Small cap stocks.

           
2. Depending on sectors - Some stocks of some sectors are listed below.
    Banking -  IDBI, Dena Bank, Bank of India, SBI, ICICI, Corporation bank.
    Pharmacy - Ranbaxy, Dr Reddy, Cipla, etc.
    IT - Infosys, satyam computers, Wipro, etc.
 
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What is Nifty and Sensex?
Nifty and Sensex are called Index. First up all let’s see what an Index is? Index is basically an indicator. It gives you a general idea about whether the market is heading towards.
In India Mainly there are two major Indices Nifty and Sensex in India.
Most of the stock trading in India is done on NSE and BSE.

The Nifty is related to all major stocks listed at NSE, Delhi
The Sensex is related to all major stocks listed at BSE, Mumbai.
Nifty consist of group of top 50 stocks while Sensex consist of 30 stocks.

If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.

Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE.

Besides Sensex and the Nifty there are many other indexes.

Like there is an index called Mid Cap Index for all mid cap stocks and Small Cap Index for all small cap stocks.
Also for all sectors there is separate index like IT, banking, Pharmacy etc
So just by looking at these indices you will come to know whether the stocks from these sectors are moving up or down.