Equity Trading 101: A Complete Guide

Equity trading can seem daunting at first, but it's actually quite straightforward once you understand the basics. Equity trading is the buying and selling of shares of companies listed on a stock exchange.

To start trading, you'll need to open a brokerage account, which is essentially a platform that allows you to buy and sell securities. This can be done online, and most brokerages have mobile apps that make it easy to stay on top of your trades.

The two main types of equity trading are long and short. Long trading involves buying a stock with the expectation that its price will rise, while short trading involves selling a stock that you don't own with the expectation that its price will fall.

Equity trading is a way for individuals or institutions to buy and sell shares of publicly traded companies. This allows investors to own a portion of these companies and share in their potential growth and profits.

The process starts in the primary market, where a company goes public by issuing newly created shares in an initial public offering (IPO). Once the IPO has been allocated, the shares begin trading on the stock exchange, where they can be bought and sold continuously.

A company can raise money after an IPO through secondary offerings, which can be dilutive or non-dilutive. Dilutive secondary offerings create new shares that dilute shareholders' positions, while non-dilutive offerings involve significant shareholders selling existing shares.

Investors can buy and sell shares on the secondary market, where they can find a wide range of investment options. By spreading their investments across several businesses, industries, and regions, investors can diversify their holdings and potentially improve their profits while managing risk.

The benefits of equity trading include liquidity, capital raising, investment options, and serving as a market-based economy indicator. Liquidity allows for easy share buying and selling, while capital raising enables businesses to expand by selling ownership shares.

To begin trading in equity, you'll need to find a reliable stockbroker. Consider factors like account opening charges, annual maintenance charges (AMC), and brokerage fees when choosing a platform.

A good stockbroker will help you open a Demat and a trading account, which are essential for electronically storing shares and facilitating buying and selling in the stock market.

You can open a Demat and trading account in a matter of minutes with platforms like Bajaj Financial Securities Limited (BFSL). Their account opening process is remarkably simple.

To open a Demat and trading account, visit the account opening form link, enter your KYC details, and provide address and bank account details. You'll also need to upload proof of identity and proof of address documents.

Choose a subscription plan and complete e-sign by submitting the OTP sent to your Aadhar registered number. Upon submission, you'll receive login credentials for your Demat and trading account.

To log in and add funds to your account, log in to the Bajaj Securities app and navigate to Limit/Fund Transfer. Click on "Add Funds" and choose your mode of transfer, such as UPI for a faster process.

Here's a step-by-step guide to adding funds:

1. Log in to the Bajaj Securities app.

2. Click on Menu.

3. Navigate to Limit/Fund Transfer.

4. Click on "Add Funds."

5. Choose your mode of transfer (such as UPI).

6. Select your linked bank account.

7. Enter the amount, choose the mode, and add funds.

Once you've completed the fund addition process, you're ready to proceed to the next step.

Equity trading is a fascinating world that can seem daunting at first, but once you understand the basics, it's actually quite straightforward.

There are three main types of trade instructions: market orders, limit orders, and stop orders. Market orders are executed immediately at the best available current price, while limit orders are executed at a specific price or better.

A market order is like making a quick decision, whereas a limit order is more like setting a goal for what you're willing to pay. This helps you avoid buying or selling at an unfavorable price.

A stop order is a conditional instruction to automatically execute a trade when a specific price level is reached. This helps manage risk and can be a useful tool for investors.

Equity trading involves buying and selling company shares on the stock market. By buying shares, you become a partial owner of the company and can potentially benefit from its future growth and profitability.

The primary market is where companies issue newly created shares in an initial public offering (IPO). This is followed by the secondary market, where shares are bought and sold continuously.

There are different types of secondary offerings, including dilutive and non-dilutive offerings. Dilutive offerings create new shares, while non-dilutive offerings involve existing shareholders selling their shares.

The benefits of equity markets include liquidity, capital raising, investment options, and serving as a market-based economy indicator. Liquidity allows for easy share buying and selling, while capital raising enables companies to raise money for expansion.

Here are the benefits of effective equities markets:

Equity trading is a process that requires research, understanding market dynamics, and making informed decisions. The institutions involved can be divided into the buyside and sellside, with firms in the latter providing market access and trading expertise to their customers.

There are several types of trades that traders can use to buy or sell stocks, including market orders, limit orders, and stop orders. Market orders are executed immediately at the best available current price.

A limit order, on the other hand, is an order to buy or sell a security at a specific price or better. This means that the transaction will only take place if the security's value is within the parameters set in the limit order.

Here are the different types of trades:

These types of trades are essential for traders to understand, as they can help manage risk and increase the chances of making a profit.

Trade execution is a crucial step in the trading process. It's where the actual buying and selling of stocks takes place.

The first step in trade execution is order placement, where investors decide to buy or sell a stock. This can be done through various order types, including market orders and limit orders.

Market orders are executed immediately at the best available current price, but there's no guarantee for the exact price at which the order will be filled. Limit orders, on the other hand, are executed at a specific price or better.

Orders are then transmitted and routed to brokerage firms electronically, where they're matched with other orders in the exchange order books. This is where the execution of market orders is quick, but limit orders may take more time.

In the case of large trades, Direct Market Access (DMA) routes them directly to exchanges for optimal execution. For smaller trades, Smart Order Routing (SOR) algorithms route orders to different venues for the best possible price.

Trade execution is confirmed with investors through brokers, who agree on the details of shares, execution price, and fees. This is followed by clearing and settlement, where clearinghouses ensure trade completion within one or two business days (T+1 or T+2).

Here's a summary of the trade execution process:

There are three main types of trades: market orders, limit orders, and stop orders. A market order is an order to buy or sell a security immediately at the best available current price.

Market orders are quickly executed, but there's no guarantee for the exact price at which the order will be filled. This means that the price of a security is secondary to the speed of completing the trade.

A limit order, on the other hand, is an order to buy or sell a security at a specific price or better. This means that the transaction will not take place if the security's value is resting outside of the parameters set in the limit order.

There are also stop orders, which are conditional instructions placed by investors to automatically execute a trade when a specific price level is reached. This helps manage risk and can be used in conjunction with other trading strategies.

Here are the three types of trades in a nutshell:

If you're a day trader, you might be interested in learning about other types of trades, such as swing trading and long-term investing.

Momentum trading is a short-term strategy where traders buy and sell assets based on recent price trends.

Traders work with market volatility by finding buying opportunities in short-term uptrends and selling when securities lose momentum.

Value investing is a strategy where investors buy undervalued stocks or trade them for less than their intrinsic values.

This approach focuses on the fundamentals of the company the stock represents and can be described as buying stocks on sale.

Growth investing targets companies that are expected to grow at an above-average rate compared to their industry or the broader market.

It's focused on increasing an investor's capital, often favoring smaller, younger companies poised to expand and increase profitability potential in the future.

Here are some key characteristics of these equity trading strategies:

Options trading is a derivative contract that allows you to trade stocks and shares at a future date for a specific price.

All options have an expiration date, which means you'll need to decide whether to exercise the option or let it expire before the deadline.

Options don't give traders the right to earn dividends, which can be a significant income source for long-term equity holders.

In contrast, equity trading allows you to hold onto stocks for an indefinite amount of time and earn dividends along the way.

Investing Strategies often involve a range of approaches, but some common strategies can be applied to any broader trading strategy. Momentum trading is a short-term trading strategy where traders buy and sell financial assets based on recent price trends.

Momentum trading involves finding buying opportunities in short-term uptrends and selling when securities lose momentum. This can be a high-risk, high-reward strategy, but it requires a keen eye for market volatility.

Value investing is a strategy that focuses on buying undervalued stocks or trading them for less than their intrinsic values. This approach is based on the theory that investors should buy businesses rather than stocks, ignoring market trends and noise.

Growth investing targets companies that are expected to grow at an above-average rate compared to their industry or the broader market. Growth investors tend to favor smaller, younger companies poised to expand and increase profitability potential in the future.

Here are some key differences between common equity trading strategies:

Swing trading, on the other hand, involves capitalizing on short-term or midterm swings in a stock price. Swing traders rely primarily on technical analysis to uncover opportunities and time their entry/exit, and often use charting tools to help discover and visualize these signals.

Day trading seeks to scalp small profits multiple times a day and close out all positions at the end of the day. This approach requires a great deal of technical analysis and sophisticated charting systems.

Long-term Investing is focused on assets that appreciate over several years. Long-term investments are assets planned to be held for more than three years, and investors with long-time horizons assume a significant level of risk to increase returns.