BASICS OF STOCK MARKET

1. Myths of the Stock Market  
2. What are Stocks/ Shares?  
3. Understanding How the Stock Market works 
4. What do we need to enter the Stock Market?  
5. How to Buy and Sell Stocks/ Shares? 
6. What Is An IPO?  
7. Buyers and Sellers 
8. FAQs

MYTHS OF STOCK MARKET? 

Hey, as we all know everyone is curious to know about Stock Market for making good profits. Here we will start with the Basics of Stock Market.  

Let us know about the stock market. First, let us clear some myths of the Stock Market. You would be having some questions in your mind such as “Is Stock Market Good or Bad? 

 Is Stock Market Gambling? Do we get rich by investing in Stock? Etc.’’ Let me explain with the help of an image  and Basics of Stock Market

In the above image, we can see the uptrend of the market. Now the Stock Market is beneficial for Investors who invest based on the Fundamentals of the Company.  Overall Stock Market is also the game of Patience. The higher the patience you have you have the higher chances of getting profits. 

Popular Myth

Stock Market’s Popular Myth is that it is known as gambling. Stock Market is called Gambling for those who play it like gambling. It is an investing tool for those who invest wisely and earn good profits.

we all know the human nature everyone wants profits and that too immediately, but it is not at all the tool to make profits immediately and that too legit profits. But no one wants to learn at least the Basics of Stock Market

Now, let’s move to the next myth “do stock markets really make us Bankrupt?” Now let me tell you an amazing fact, The Top 10 Richest person list in the world itself includes 7 Richest Persons who have got rich through Stock Market.  

WHAT ARE STOCKS?  

 The first part of the Basics of Stock Market is What are Stocks? Whenever a company needs more money for its expansion or other uses. The Company expects money from the public and invite them to become the shareholders of the company. Stock Comes in a Category of Financial Instrument which we get when invested in a particular Company.

The Name of the Shareholder, Number of Shares bought, buying price is written on the Share Certificate. But wait do you think is this going to be the same nowadays also, the answer is No. We get our stock in De-mat format nowadays. We don’t get any physical Shares when we buy shares, they are credited into our De-mat account which we open with our broker.  

UNDERSTANDING HOW THE STOCK MARKET WORKS 

Assume if You want to buy a Stock of a particular Company, do you think you will go to the office of the company and tell that you want to invest in their company and make a deal there. it will not go that way. There is a process by which one can invest in the shares. As we all know if we want any Clothes we go to the Store and Select, similarly we have Stock Exchanges Where the company is listed. 

We can buy shares from the Stock Market (Stock Exchange) and become a shareholder of a company. Now when a company gets listed you cannot buy shares directly from the company, there should be some shareholder of the company who has shares of the company to sell, So the Share Market is a place where a Buyer and Seller of Stocks meet and make a deal.  

Also Read : Can Stock Market make you Rich

WHAT DO WE NEED TO ENTER THE STOCK MARKET?  

Now let us see what do we exactly need to enter the Stock Market. First of all, no individual can directly go to Stock Exchanges and make deals, Buy or Sell. Individuals should go through Stock Brokers to Invest in the Stock Market. The requirements to enter the Stock Market are as follows: –  

• Pan Card  
• Bank Account  
• Age Should be 18+  
• De-mat Account  
• Trading Account  

Now from the above requirements you can be clear about Pan Card and Bank Account, but you should be thinking that where to open the De-mat and Trading Account. 

Don’t worry there are tons of Stock Brokers in India which offer you De-mat and Trading Account. You can open with them the broker himself will open your De-mat and Trading Accounts. Now let us see what is the use of these accounts. First of all, we need money in our bank account to buy shares the

The Trading account is opened with the broker, The De-mat account is in which you store your Shares when you buy Shares of any Company you don’t get them to your address physically. They are kept in your De-mat Account.  

HOW TO BUY SELL STOCKS?  

Now here comes the big question, How to Buy and Sell the Stocks, usually there are 5 specs to buy or sell a share, let us talk about them,  

• Quantity  
• Order Complexity  
• Order Type  
• Product  
• Validity  

Quantity

Here we need to enter the quantities of the share we want to Buy/Sell.  

Order Complexity

Here there are two Simple categories and AMO. Simple Order means the order which you are placing during the Market Hours, and the AMO (After Market Order) means the order which you are placing after the Market Hours.  

Order Type

In Order types there are majorly two types of orders they are Simple and Limit. Simple Order Type means the order in which you want to buy the Share at the Current Market Price, Whatever the price may be, and the Limit order in the simple sense means bargaining. In Limit order, you place an order at the price you want to buy the Share   

 Product

Here the in product type there are two options, Intraday and Delivery, in Intraday the shares you bought are held only for one day, the shares you buy will be sold before the same day’s closing hours, it is mostly used by the day traders, in Intraday the shares won’t get delivered into your De-Mat Account.  

Whereas the Delivery options let you take the delivery of the shares into your De-Mat Account it is used by the investors, not traders. Who wants to take delivery and hold them for a particular period and make capital gains?  

 Validity

In Validity you get two options i,e., Day and IOC, Day order means the order which you are placing will be open for all the day and can be executed at any time in the day and in IOC they validity Immediate. The order gets placed immediately if it gets a match or it gets canceled.

WHAT IS AN IPO?  

  Let’s move to our Next Topic that is IPO (Initial Public Offering), IPO is also an important topic in the Basics of Stock Market. Usually, when a company is started in its initial stage it is not started with the funds of the public it is started by the promoter of the company, later when it earns decent profits and becomes stable can collect money from the public and make them Share Holders of the company. 

In India there is a Stock Market regulatory authority run by the Government of India and its name is Securities and Exchange Board of India (SEBI). 

Rules of SEBI

According to the rules of SEBI if a company needs to be listed on the Stock Market it should be earning profits at least for the past three years. 

There is a process if a company needs to be listed. The Company needs to file a Draft Red Hearing Prospectus (DHRP) Which contains the details of the company, like from the start of the company and its history then SEBI checks it and goes through it and sees if the Company is eligible to get listed. 

The DHRP is made available publicly to the investors and people who need it. If the Company gets approval of DHRP and the next step is to file Read Hearing Prospectus (RHP) Which contains the details of the shares of the company and the details of the funds which company is willing to collect from the public, etc., 

Then the company decides its shares price to offer the Share. Here the topic of Primary and Secondary Market comes into play, let us understand what is a primary market. whenever a Company offers its Shares for the First time or for the additional times, it deals through the primary market where the regulatory is absent and the deal is made between the Share Holder who wants to invest in the company and the company who wants to offers its Shares directly. 

Now let us see what the secondary market is? After the process of getting listed on the exchange the shares of the company can be bought and sold only between the Share Holders of the Company who had bought the shares directly from the company so in the secondary market the Seller and Buyer both are persons here Company is not involved in buying or selling. 

To know More about SEBI – Click Here

Role of Regulatory

Here regulatory is present to monitor suspicious activities, after the listing of the company the price of the share reacts according to the demand and supply of the share, in simple words we can say IPO are offered in the primary market by the company to directly to the buyer of the share wherein the secondary market the Share Holders of the company Buy and Sell them. 

There is also another term which comes into the category of the primary markets, that is Further Public Offering (FPO) it is done after the listing of the company where the company needs extra funds for their operations or expansion, etc., Also in this process, the shares are offered by the company directly to the buyers.  

BUYERS AND SELLERS  

As in the normal scenario, the Stock Market also has buyers and sellers of the Shares, who manage the price movement of the Share. The Buyers and Sellers decide the Price of the Share. According to the normal economics of Demand and supply, the Demand and Supply of a particular Share in the Market decides the price of the Share. As we can also in many scenarios according to the news and the performance of the company the buyer and sellers react. 

Also Read : How to do Fundamental Analysis of Stocks

FAQs

Also Read :- The best Stock Brokers in India

Rohit Rajendra