Basic Trading Terms you must know before your first investment

Once you open your trading and demat account and complete your KYC on-boarding formalities, you are good trade in the market. If you have activated your online trade then you can do it from the convenience of your home itself. Here are a few basic terms you should know before you start trading:

Market Order

The order to buy or sell is placed at the best possible market price available in the market.

Limit Order

The buy or sell order is placed with a maximum price in case of buy order and a minimum price in case of sell orders. The system will execute the order at the limit or better and if that price is not reached then the order will not be executed.

Good-till-Date order

This is an order which will remains valid in the system till the end of the trading day at 3.30 pm. If the order is not cancelled till that time then order is automatically cancelled.

Immediate or Cancel order

This is also called an IOC order. If the order is not executed immediately, the order is automatically cancelled by the system itself.

Order Book

This is the place in your online trading account where you can see all buy and sell orders for the day, whether executed or pending.

Trade Book

This is the list of all orders that have been actually executed by the system along with the execution price and quantity. Pending orders are not shown here.

Stop Loss

This is the price at which the order is automatically terminated and the loss is booked. In case of buy orders the stop loss will be below the buy price and in case of sell orders the stop loss will be above the sell price. It is an insurance against trading loss.

Intraday Trade

These are buy-and-sell trades which are covered the same day and hence do not result in delivery

Delivery trades

In contrast to the intraday trades, these delivery trades are not squared off on the same day and result in delivery. Buy delivery will require payment of cash and sell delivery will require tendering shares from the demat account

Demat account

This is the electronic account where your shareholdings are actually maintained in custody

Fundamental analysis

Evaluating a stock based on its income statement, balance sheet, cash flow statements, management quality etc.

Technical analysis

Evaluating stock opportunities based on supports, resistances, momentum moving averages and other chart-related indicators

Rolling settlement stocks

These are the normal T+2 stocks. When you buy or sell these stocks you can cover them intraday. If they are not covered intraday, then they result in delivery.

Trade 2 Trade Stocks

These are stocks on which only compulsory delivery is permissible. If you buy these stocks ensure that you take delivery and if you sell then you need to give delivery. Intraday trading is not permitted on these stocks

Auction

If you sell shares and are not able to give delivery, then these shares go into auction. The exchange auctions these shares and any losses will get debited to your account

Discount brokers

They are brokers who only offer online execution. They do not offer research, advisory or any other value-added services. They charge lower brokerage rates.

Full-service brokerage

These are brokers who will charge a higher brokerage but will provide value-added services like research and advisory services

Brokerage charges

This is the charge as a percentage of the value of the transaction that the broker charges the client for the services rendered.

Statutory charges

These include GST, STT, stamp duty etc which are collected by the broker on behalf of the government of India

Nifty and Sensex

They are the indices on the NSE and the BSE respectively and they give an indication of the undertone and direction of the market

Bull market and bear market

This is a term that originated in the US stock exchanges. A bull market indicates a sustained up move in the markets whereas a bear market reflects sustained downside in the markets.

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