Opening your trading account with your broker is the first step to participating in the equity markets. A trading account requires your KYC to be done and your trading account needs to be linked to your demat account. Today you have the facility of online trading, which makes the entire trading process extremely simple, transparent and seamless. Here are 8 basic things you need to remember while operating your trading account…
- Focus on well researched investment ideas and do not focus on getting hot tips in the market. Today there are a number of individual advisors who are willing to give you trading advice on your email, mobile and WhatsApp at very low or zero cost. Be cautious with these offers. It is always better to put your attention behind well researched fundamental and technical calls. Most tips tend to either mislead you. Over the medium to long term, it is well researched trading and investment ideas that will help you create wealth.
- Once your transaction gets executed confirm that the price and quantity is as per your stipulation. In case you are executing your order over phone, then ask the dealer to confirm the details immediately on execution. In case of online trades you can log into your order book and check the execution of trades. In case of any discrepancy you need to immediately take it up with the broker.
- Check every contract note thoroughly. Most investors and traders do not go through the contract note in detail. Remember, a contract note is a legally binding contract and if there are any discrepancies in the price or quantity with the confirmation that you have got then you need to immediately bring it to the notice of your broker. Also check for issues like brokerage charged, fixed brokerage rates, penny stock brokerage etc. If you do not go through the contract note and bring such discrepancy to the notice of the broker, then it will be assumed that the contract note is acceptable to you.
- Ensure that your demat account and the bank account is reconciled with your trading account on a weekly basis. We suggest this discipline irrespective of whether you are a frequent trader or an infrequent trader. You need to ensure that every purchase that you have made reflects in your demat account within the next 3 working days. Similarly, in case of any sale of shares, the monies must reflect in your bank account by the third day from the trade. Such regular reconciliation will ensure that any discrepancies are immediately identified and rectified.
- Filing and documentation is an important part of operating your trading account. Ensure that all your contract notes are filed in chronological order. This will make the preparation and checking of your annual capital gains much easier. Maintain a log of all correspondence with your broker as that will be useful in resolving any future disputes with reference to your trading account. On a monthly basis, take a printout of your demat holding statement and your demat transaction statement and file it for future reference.
- Your broker also plays a role of advisor. Make it a point to ensure that your trading actions are in tune with your risk appetite. Your financial advisor can help you measure your risk appetite and suggest appropriate stocks. For example, if you are a retired person living on monthly pension, you do not want to hold too many risky stocks from the mid-cap space in your portfolio. If you are looking at equities for giving regular income, then focus on stocks with high dividend yields that are sustainable. Your financial advisor can help you with such finer requirements.
- Confidentiality and secrecy of your trading account is very important. In case you are using online trading account then ensure that you do not write down your user name and password anywhere. Do not let your password be too obvious. Take care that you do not trade from a cybercafé where the security of connectivity and data cannot be assured. Do not ever leave signed debit instruction slips (DIS) with your broker, sub-broker or even with your advisor. Many cases of fraud happen in stock markets because people tend to be quite careless with respect to their trading account.
- Lastly, there is an important tax angle to it. You need to calculate the likely capital gains tax that you will have to pay. That is because you need to deposit your advance tax based on estimated profits on a quarterly basis. Any delay in depositing advance tax on expected capital gains before the due date invites penalty. Keep your advance tax challans ready with you so that you can use the same for claiming credit while filing your returns at the end of the year.
Remember, trading in equities is not just about buying and selling shares. There are a lot of collateral issues that you need to take care of. These 8 points will give you a quick ready fix on the key points to keep in mind.
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