Category: Share Trading Terms

Chapter 7- Trading Options – Brokerage Houses

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 We have understood the basics; we have taken the time to get used to Market and Trading Terms. Now is when we want to take the plunge and start experiencing ourselves. To do so, one would need to start trading. To “trade” means to buy and sell securities from any of the Exchanges. There are two basic ways exchanges execute a trade:

(a) Exchange Floor (through normal brokers)
(b) Electronically (through online brokers)

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Exchange Floor

Most people already have an idea of what Trading on the floor of a Stock Exchange (BSE or NSE) is like, thanks to television and the movies. When the market is open, you see hundreds of people rushing about shouting and gesturing to one another, talking on phones, watching monitors, and entering data into terminals. It could not look any more chaotic.

Here is what a typical sale would work like on the Exchange Floor. You tell your broker to buy 100 shares of Reliance Industries at market. Your broker’s order department sends the order to their floor clerk on the exchange. The floor clerk alerts one of the firm’s floor traders who locates another floor trader willing to sell 100 shares of Reliance. This is easier than is sounds, because the floor trader knows which floor traders make markets in particular stocks. The two agree on a price and complete the deal. The notification process goes back up the line and your broker calls you back with the final price. The process may take a few minutes or longer depending on the stock and the market. A few days later, you will receive the confirmation notice. Of course, this example was a simple trade, complex trades and large blocks of stocks involve considerable more detail.


Slowly more and more trading is moving to the online networks and off the trading floors. There are online brokers like SSKI(ShareKhan), ICICIDirect, KotakStreet, & IndiaBulls. Once you have an account with any of these Online Brokers, you will be able to invest online and be able to watch and monitor and manage your portfolio with ease. BSE does some part of its trading Electronically, NSE is supposed to have a much bigger % of its trading online.
The electronic markets use vast computer networks to match buyers and sellers, rather than human brokers. While this system lacks the romantic and exciting images of the floor, it is efficient and fast. Many large institutional traders, such as pension funds, mutual funds, and so forth, prefer this method of trading.

Depending on whether you are more comfortable in trading over the phone by talking to Brokers, or whether you like to get into yourself and are more comfortable in ordering online yourself through Online Brokerage companies, you can select from amongst the following. The Brokerage companies and banks listed below are not an exhaustive list of available options, they are just a few names to get you going. As you stay longer in the market you will be able to figure out more and be able to decide on any other firm if you so desire.

Some More Online Brokerage Firms, apart from :

1. S S Kantilal Ishwarlal Securities Pvt. Ltd. (

From their website – “Sharekhan is an equities focused organization tracing its lineage to SSKI, a veteran equities solutions company with over 8 decades of experience in the Indian stock markets.

Sharekhan is about Focus. Sharekhan does not claim expertise in too many things. Sharekhan’s expertise lies in stocks and that’s what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for you!

To sum up, Sharekhan brings to you a user- friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares. ”

2. ICICI Direct (

From their website – “ What so unique about
The Unique 3-in-1 account that gives you !

Convenience: the 3-in-1 account integrates your banking, broking and demat accounts. This enables you to trade in shares without going through the hassles of tracking settlement cycles, writing cheques and Transfer Instructions, chasing your broker for cheques or Transfer Instructions etc.
Speed: You can now get the latest quotes of scrips on and place an order almost instantly.
Control: You can be assured that you have in fact placed an order at the price you always wanted to, but may not have been able to do so till now. Thereby giving you control over your own trades.

Independence: Instead of transferring monies to a broker’s pool or towards deposits, you can manage your own demat and bank accounts when you trade through Trust: comes to you from ICICI, the organisation trusted by millions of Indians.”

3. Kotak Securities Ltd. (

From their website – “Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and Goldman Sachs (holding 25% – one of the world’s leading investment banks and brokerage firms) is India’s leading stock broking house with a market share of 5 – 6 %. Kotak Securities Ltd. has been the largest in IPO distribution – It was ranked number One in 2003-04 as Book Running Lead Managers in public equity offerings by PRIME Database. It has also won the Best Equity House Award from Finance Asia – April 2004.

The company has 42 branches servicing around 1,00,000 customers. the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. Kotak Securities Limited manages assets over 1200 crores under Portfolio Management Services (PMS) which is mainly to the high end of the market. Kotak Securities Limited has newly launched “Kotak Infinity” as a distinct discretionary Portfolio Management Service which looks into the middle end of the market.”

4. IL & FS Investmart ( 

From their website – “Your world of financial services and India’s financial multiplex, IL&FS Investsmart Limited (IIL) is a premier financial service organisation providing individuals and corporates with customised financial management solutions. We work towards understanding your financial goals and helping you attain them. Our institutional expertise, combined with a thorough understanding of the financial markets results in appropriate investment solutions for you. At IL&FS Investsmart, we recognise that your dreams, needs, aspirations, concerns and resources are unique. This is reflected in every move we make with and for you. We have a deep appreciation for the value of building a long-term partnership with you.”

Categories: Share Trading Terms

Chapter 6- Share Trading Terms (Day Trading, Market & Limit Order, Stop Loss, Booking Profit & Loss)

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Now that you already know some of the Basic Stock Analysis terms, we are going to move on to a few terms that are in constant use while trading on the exchange. You will hear these terms in Analysis by Experts and read about them in websites and newsletters. It is important to understand these terms to be able to be able to Trade or invest efficiently, so you might want to focus on this chapter.

Day Trading

Day trading is the type of trading on the Share Market where a trader enters several securities for just a fraction of a trading day. The typical day trader might hold a stock for only a few hours and may aim for a small percentage profit. Though the percentage gains that day traders attempt to capture are often miniscule, but these gains when multiplied by large volumes of hundreds (or even thousands) of shares, can turn out to be very profitable amounts. 

The typical day trader usually trades on several different stocks in a single day. In contrast, the term Investor is most often used to refer to someone who buys a stock in the expectation of remaining invested in it for a long term.

Market Order & Limit Order

An order to a broker to buy a specified quantity of a share at or below a specified price, or to sell it at or above a specified price (called the limit price) is called a Limit Order. This ensures that a person will never pay more for the stock than whatever price is set as his/her limit. This is one of the two most common types of orders, the other being a market order.

A Market Order is an order to buy or sell a specific number of shares at the best price available at the time the order is routed to the trading floor. Because market orders are normally executed immediately at the current market price after they have been routed to the relevant exchange, these orders are almost always filled within a very short period of time.

Stop Loss Orders

A “Stop Loss Order” is an order to sell a stock if it hits a certain price below the Current Market Price (CMP). For example, if we buy 1000 shares of a company ABC for Rs. 45 each, obviously the purchase was made in the expectation that the stock price would go higher. However it would be prudent to set a Stop Loss order to safeguard against too much loss in case the stock suddenly slides down. We could then put a stop loss order on stock ABC at say Rs. 40 so that the shares are automatically put on the Selling queue if the Market Price touches Rs. 40/- This is an example of using Stop Loss to minimize losses.

In addition to placing Stop Loss orders to limit your losses, you can also use the technique of “trailing stops” as a means of locking in your profits should the stock price increase. Referring to the example above, assume that the share price of XYZ increased to Rs.60.00. You now have an unrealised gain of Rs. 15.00 per share. You believe that the share price will go even higher so you decide not to sell the shares at his time. However, at the same time, you wish to protect or lock in a portion of your unrealised profit on these shares in the event that the share price does in fact move back down. To do this, you would cancel the existing stop loss order of Rs. 40.00 and place a new stop loss order at, say, Rs. 55.00. If the share price declines to Rs. 55.00 your position will be sold out at a gain of Rs. 10.00 per share. If the stock continues to go up, you profit even more and may decide to place another stop loss order at a higher price to lock in further gains. You can continue to “trail stop” up as the price rises as many times as you wish.

There are many views on where you should set your stop loss price levels. Though this discussion can get complex and beyond the scope of this book, a common and simple approach is to set your stop loss price between 10% to 20% below the price you paid for the stock. Remember though, that this is only a thumb rule and may not be the best range for all situations.

Booking Profit and Loss:

Booking Profit and Loss are Investment terms and not trading terms. While Day Trading, the shares are bought and sold off within the same day. However, for a medium or long-term investor, the stocks are often at a different price than the price they purchased it for. 

Unless these shares are sold, the profit or loss made due to a change in the market price is only notional since the market price can reverse in trend. So it is only when the shares are sold, that the profit or loss is actually confirmed for that trade. Selling of shares to confirm and claim profit is called “Booking Profit” and selling shares to reclaim money even at a loss is called “Booking Loss”.

Going Long and Short:

Going Long is the investor’s purchase of a security for Investment or Trading with the expectation that the price will rise resulting in a Profit once the security is sold. Such an option is called a Long Option. Selling Stock that an Investor does not own by borrowing Shares from a broker is called Going Short. The assumption in Going Short is that the price of that security will fall. The investor then buys (covers the short) the shares at a lower price than what they were sold for, recognizing the difference as a profit.

Categories: Share Trading Terms