Once you’ve understood the basics of stock markets, here’s how you can actually start buying and selling shares by simply following these 7 simple steps.
Step 1: Get the essentials in place – PAN & Aadhaar
You’ll need a PAN card or Aadhaar card to start investing in the stock markets. These are required for the KYC (know your client) procedure to open a demat account. Along with this, you’ll also need a 6-month bank statement and a cancelled cheque.
Step 2: Get a broker
To buy and sell stocks you can’t directly do it, you’ll need a broker. A broker could be an individual person, a company or an agency that is registered and authorized by SEBI (Securities and Exchange Board of India- A body that supervises the stock exchanges to make sure nothing shady goes on in here!) to trade on the stock exchanges.
Step 3: Open Demat & Trading
Once you have a broker, whether in form of a person, company or online, you’ll need a demat and trading account. Just follow these steps to open these accounts before investing.
Step 4: Do a background check
Understand your investment requirement and based on this shortlist stocks that meet your goals. Do a thorough background check on these stocks and ask advice from experts, professionals and even friends before you buy them.
Step 5: Stalk the stocks
Once you have shortlisted the stocks, monitor them for a while so that you can buy them at the lowest price possible.
Step 6: Decide your order
Since share prices fluctuate every second, there are 3 kinds of orders you can place with your broker:
- A limit order: Here you place a maximum or minimum limit at which you are willing to buy or sell a particular stock. Example, you place a limit order for 20 shares at a limit price of Rs. 500 per share. The minute share price of that stock falls below Rs. 500 your order will get processed. In case only 10 shares are available at a price below Rs. 500 then only 10 will be bought.
- A market order: This is is the most common one used by beginners so we suggest you opt for this. Without any specifications, you place the order with your broker and your order gets executed at the ongoing price. Also for long term investment purposes, this type of order is ideal since daily price fluctuations will not affect your investments.
- A stop-loss order: Here you tell the broker to sell your shares when it reaches a certain price. This helps you limit your loss if the share were to fall further. Example: You buy a share for Rs. 200 and put a stop loss at Rs. 195. This means when the share prices drop the minute it reaches Rs. 195 its sold to avoid you any further loss.
Step 7: Place your order
Once you’ve decided which, how much and at what price to buy/sell shares, to actually get your order executed you need to inform your broker either through your trading account or by simply calling your broker.