What is the stock market?
The stock market is where buyers and sellers meet to trade financial securities. It allows traders to deal in financial instruments like bonds, stocks, currencies, commodities, derivatives, etc., to make short-term and long-term profits via trading and investing. Stock market conditions change every moment, affected by numerous factors, like geographical, political, world economy, announcements by companies, etc. Sometimes it reacts hugely, and sometimes a mild fluctuation can be seen. After the What is share market, let us know about bear and bull market below.
A continuous downturn in securities is a declining market known as a bear market. A bear market is seen in a declining economy. Contrarily, a bull market is a market that is on the rise in a sound economy.
Stock trading is considered the most efficient way that helps traders to create wealth over time. Stock markets are inherently risky that the traders manage with investing and trading strategies. Traders require a disciplined approach to tackle the market’s ups and downs. Individual and institutional investors can trade securities on stock exchanges.
How does the stock market work?
Stock markets deal with dematerialised securities only. The stock markets operate online through stock exchanges where individuals can buy or sell securities. To buy securities, you need to open demat account online. Trading in the stock market refers to buying or selling securities on one of the stock exchanges, like BSE, NSE, MCX, etc. The working system of the stock market depends on various stock exchanges, which can be National level Stock Exchange or Regional Level Stock Exchanges. Stock exchanges and clearinghouses process all the trading settlements. Markets are open for traders Monday to Friday between 9:15 AM to 3:30 PM IST. It is the trading session in which traders can place their trades.
Companies list their shares for capital generation from the public through an IPO in the primary market. After completing the subscription process, those shares get listed on stock exchanges. Traders can buy and sell these securities in the secondary market.
Different types of securities are settled differently on the stock exchanges. The stock exchanges follow the “T+ settlement days” system, where t is the current trading day. At present, it takes “T+2” days to settle a trade. Recently SEBI has given the stock exchange the option of “T+1” days to settle the transactions.
Stock exchanges deal with investors via their registered stockbrokers. These brokers have registered with the market regulator SEBI also. Individuals need a registered broker to open an online trading account and demat account.
Difference between demat and trading account
Both accounts are closely related and used for different purposes for online stock trading.
A demat account is an online repository for investors’ securities to hold with a stockbroker. It holds different types of securities, including equities, bonds, mutual fund units, government securities, exchange traded funds, derivatives, etc. On the other hand, a trading account connects traders with the stock exchange to trade securities through the broker’s trading platform. It is required to place buy and sell orders in the stock market.
How to open demat account online
- The Demat account opening process is now easy and completely digital. One can open a demat account and trade with a stock broker offering online trading services at affordable pricing. You can consider a discount broker.
- You need soft copies of your KYC documents and income proof to open your brokerage account online.
- Access the online application form at the official website of the broker and input required personal details, and upload the documents.
- The broker will verify the documents and create your demat account.
- You can log in to your account with the log-in credential given by the broker.
This way, the stock market works, and you can get the way with your demat account to build a significant corpus with long-term stock market strategies.