What Are the Pre-Requisites for Online Trading?
What are the online trading requirements that traders must be aware of? Here we look at the process of activating and commencing your online trading and how there are some basic requirements for online trading that you must adhere to. Let us get down in detail to the online trading requirements.
Prerequisites Required for Online Trading?
There are basic things you must understand about online trading requirements. Let us start with how to open an online trading account.
An online trading account opening is just like opening a regular trading account with a broker. Once you fill-up the form and sign the broker/client agreement, you can submit all the documents for KYC. There are 3 kinds of documents to be submitted here. First and foremost are your photographs and PAN card as mandatory documents.
Secondly, you require proof of identity with your photograph as part of the document. It could be any authorized document like your passport, driving license, Aadhar card, etc. Thirdly, furnish the proof of address. This document can be a passport or the latest landline telephone bill, electricity bill, water bill, etc. If all documents are in place, the account opening process takes just about 2-3 days.
Remember that you also need a Demat account to hold your shares and other securities. Normally, a Demat account is opened along with the trading account and it is called the Trading Cum Demat account. SEBI has permitted clients to do online Aadhar based authentication to open a trading account which is a fairly simple E-KYC process and can be completed in a few minutes flat. Despite all the online formalities, you are also required to do an in-person-verification (IPV). Once that is done, you are good to operate your trading account and Demat account like any normal trader.
Let us now get down to the actual trading
Once your trading account is opened, the broker will allow you a unique user name and password. Normally, these are sent to your address by registered post, but nowadays, brokers are also allowing you to set passwords through registered email supported by mobile authentication using One Time Password (OTP). Here are the steps you must follow to start online trading on your account.
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Once your user name and password are received, the first step is to activate your trading account by logging in. The system will prompt you to change the password and also add a level of authentication like an OTP password or your date of birth etc as a second level authentication.
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Once that is done, you are all set to trade. However, before you start trading ensure that you fund your account adequately. There are different ways to fund the account with money. If your broker is offering a 3-in-1 account, you can directly transfer funds from the connected bank. In most cases, even that is not required and you can directly execute based on your bank balance blocks. If it is a 2-in-1 trading account, you can either transfer funds via NEFT or use the payment gateway to transfer funds. However, payment gateway entails cost.
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Once funds are transferred and your trading account is funded, you are all set to trade. You can place orders on the trading platform by defining the quantity and the price. Once the order is placed, you can check the status of the order in the order book in your online trading account. Once the order is executed, the executed portion of the order is reflected in the Trade Book. That is an affirmation that your order is through.
To get comfortable with the trading process, there are 3 important steps. Firstly, go through the complete online trading presentation provided by the broker so that you come to know about all the nuances of the services offered. Secondly, don’t jump directly into executing large trades. Get comfortable with smaller trades and gradually scale up to higher levels. Lastly, check that the movement of bank debits, trade execution, and Demat credits happens seamlessly. Also, you must keep an audit trail and ensure that debits, credits to the Demat account and bank account happen on time.
What Is Online Share Trading?
Online share trading is the buying and selling of shares and other securities online.Here online means; trading can either happen using the trading interface on the laptop or PC, or by downloading the online trading app can be downloaded and the online share trading can be done using smartphones, tablets, etc.
How to Start Online Stock Trading?
You start online trading by opening your online trading account with a broker and then activating that account. Once the account is activated for online trades, you can put trades in the system and start trading. It is best to start small.
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Frequently Asked Questions
Beginners must first understand the entire process flow of online trading before actually putting full-fledged trades. Ideally, start small in equities and then look at futures and options at a later stage. When you buy stocks, get familiar with the process. See how the stock shows up in the order book. Try modifying the order in the order book. Then confirm if the trade is showing up in the trading account etc. The idea for beginners is to get familiar with the full process end to end.
The basic rules of stock trading are many, but here are a few golden rules to follow. Firstly, always trade with the trend and don’t try to outsmart the market. Secondly, always trade with strict stop losses and profit targets. Thirdly, don’t fall in love with the stocks you trade and take a dispassionate view on these stocks. Lastly, don’t lost sight of risk. Keep levels you are willing to lose in a day, in a week and as an overall part of your capital. At that point, get back to the drawing board.