How Share Market Works? Beginners Complete Guide 2021

  • Post last modified:July 27, 2021
  • Post category:Stock Market
  • Reading time:36 mins read
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Investing in share market or stock market is an excellent way to grow your wealth. But how share market works and how do you actually start step by step?

There are tons of question arise in a beginners mind and I can easily relate as I have been through the same phase when I started in year 2010.

Let us know few of them:

  1. How stock market started in world and in India?
  2. What is share(stock) market?
  3. Who control stock market in world and in India?
  4. What is Stock Exchange?
  5. Where to start in share market?
  6. Basics things to know in share market?
  7. How share market or stock market works?
  8. As a beginner, what all things to keep in mind before starting to trade or invest?
  9. Can I invest if I don’t have much money?
  10. Are stocks a good investment for beginners?
  11. How much money I can earn through trading in share market?

I can keep on writing infinite questions, its a never ending saga but it is really important to ask question. However in this guide I have tried to give the answer of every aspects as a beginner one should know before investing or trading.

Just like any subject you have studied in your life, the first most thing a teacher teaches is its history or origin. Similarly before you jump directly to understand the technical aspects, it is advisable to learn a little about the history of stock market in world and in India.

Attention: This is going to be a long journey understanding the complexities of share market. Trust me it is not something as “quick rich scheme”. would recommend you to have patience and learn just like you learn any other skill.

 

Stock market history in world and in India:

 

Stock market history in world and in India

 

No, we are not going to study Charles Darwin “Theory of Evolution” here. However we can understand the similarity between both. Just like it took thousand of years to be where we are as an human likewise it took at least more than 500 years to be where stock market is currently.

With all advancement of technologies now anyone, anywhere can easily trade and invest either on their mobile phones, PC , laptop, tablet etc.

 

How stock market started in world?

The first ever noted issue of stocks was made by the Dutch East India Company. As their businesses started growing, most merchants required extra capital to invest, however there was a limit to how much they can  individually invest and thus the concept of joint stock was created.

The Dutch East India Company established the Amsterdam Stock Exchange in the year 1602.

London Stock Exchange was started in 1773 out of a coffee house.

The first US stock exchange at Philadelphia was set up in 1790.

precisely after 2 years, twenty four supply brokers signed an agreement under a Buttonwood Tree, which came to be known as the Buttonwood Agreement in 1792.

In March 1817, the group renamed itself as the New York Stock and Exchange (NYSE) board. That is where NYSE (Wall Street) has remained till date.

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How Share market started in India?

 

How Share market started in India?

 

Other than this there were few other exchanges opened but get closed due to lack of trades and technical advancement with time.

  • Ahmedabad Stock Exchange – Founded in 1894 it solely focused on trading shares of textile mills.
  • Calcutta Stock Exchange– Founded in 1904 started trading shares of various plantation mills(still Operating)
  • Chennai Stock Exchange – Founded in 1920.

Indian market has a history that goes way back to the 1800s. Earlier, stockbrokers would meet around Banyan trees to conduct trades of stocks. However with the time and due to increasing brokers they had to relocate from one place to another .

Eventually, In 1854 they relocated to dalal street and this is the place where the oldest stock exchange of Asia – Bombay stock exchange (BSE) is now located . In 1993 NSE (National Stock Exchange) was formed.

From this we can now know that Indian stock markets have a strong history. So this was a brief history of how share market started in world and India, now we can focus our attention to current phase of stock trading and investments.

 

What is share market?

There is little difference between share market and stock market. However most of the people do not know this basic difference.

  • The share market is a place where shares are either traded or issued.
  • Whereas stock market is similar to share market except that in share market only trading of shares are allowed, while in stock market trading of shares, derivatives, bonds, commodities, mutual funds etc. takes place.
  • There are two kinds of share market, the Primary market and the secondary market.
  • Two important stock exchanges in India are the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange).

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How Many Types of share market are there?

There are two kinds of share market, the Primary market and the secondary market.

 

Types of share market  

 

  • In the primary market a company gets registered to issue shares and raise money from public or other investors.
  • Any company enters primary market to raise capital and the first issuance of share for raising capital is known as IPO (Initial Public Offering). This is also called getting listed in a stock exchange. Once it gets listed in public domain on any exchange (NSE , BSE) people can trade.
  • Once the shares are sold in the primary market it enters the secondary market for trading. In the secondary market the investors can enter into position or exit as and when they feel like. Any trader or investor now can easily though there fingertips trade or invest its money.

We will not touch the types of trading occurs in stock market right now as first we need to clear the basic understanding or mechanism through which it performs. So hold your horses and go step by step.

Attention: I have tried to make various topics we are learning here as brief and crisp, this topics individually has the capacity to be a full fledged new blog. However this will be enough as an starter or beginner, with time you can read all the topics in details which will be available on moneycontain.  

 

Who control stock market in world and in India?

 

Who control stock market in world and in India?

 

The stock market in every country is regulated or controlled by the corresponding governing bodies in that country. For e.g.:

  • SEC (Securities Exchange Commission) for USA
  • The Financial Conduct Authority (FCA) regulates the financial services industry in the UK
  • The Financial Services Agency is a Japanese government agency and an integrated financial regulator responsible for overseeing banking, securities and exchange, and insurance sectors in order to ensure the stability of the financial system of Japan.
  • SEBI (Securities & Exchanges Board of India) for India

However Stock Exchanges in India earlier were regulated directly by the Government of India. In the year 1988 the Government of India constituted SEBI to act as the independent regulator of Stock exchanges, the primary market, Mutual Funds etc.

 

What Is The Role of SEBI in Indian stock market?

Basically SEBI (Securities and Exchange Board of India) primary objective is to protect the interests of people in the stock market and provide a conducive environment for market participants.

  • Keeping eye on exchanges like NSE & BSE so that no partiality is done 
  • Small retail investors like common citizens (you and me) are protected
  • The main aim of the SEBI is to ensure that end investors benefit from safe and transparent dealings in the market 
  • Protects illegitimate activities or unfair practices in primary as well as secondary market 
  • Brokers and sub-brokers do their business impartially
  • Avoiding unhealthy practices done from any corporate clients or disproportionately taking any benefits from market (e.g. harshad mehta scam, 1992,  Satyam computers scandal 2009) 
  • Huge investors with big cash should not in anyway manipulate market 
  • At core Market Regulators helps in developments & progress of Market 

 

Who is Stock Broker?

So as of now you are aware of history of stock market, types of share market, who  & how share market gets regulated in India, but without stock broker this chain remains incomplete.

A stock broker is your gateway to stock exchanges. Stock broker is one of the most essential part of share market. It’s very much similar to a organization (including govt. or private banks and independent discount brokers) registered with SEBI & hold stock broking license with them.

They provide services to an individual trader or investor in opening of a trading & demat account. I will address the role of trading and demat account separately.

Suppose you want to start trading and investing today, however for that you can’t go to National stock exchange‘s office. You can look for broker online or nearby your local area.

 

For example:

Zerodha who is India’s biggest broker in terms of active client of more than 1.5 million and total client base of 2.5 million. You can easily open a demat and trading account that too online with them.

Here is the link to apply for zerodha online for best trading & demat account service in India. There charges for brokerage as well as account opening(demat and trading) is quite low. 

Here is moneycontain review on Zerodha Stock Broker

The broker helps you execute your buy and sell trades. Once you open account with them they will provide you, your login-ID (client-id) and password to your mobile no., email id. You can use it to login to their respective trading platforms and start trading online by yourself.

If you are not technology driven or do not have much time, you can simply call them and ask them to place orders on your behalf.

However you need to let them know what exactly you want to buy, quantity, at what price etc. 

Some brokers will also advise you on what stocks to buy, what stocks to sell and how to invest money in share markets for beginners(of course they take charges).

Note: You can open a free trading, Demat & mutual account Here

So in simple words Brokers act as a middleman or mediator between you and exchange.

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Difference between Trading and Demat Account?

I will explain this in short as both have a definite purpose for which they are used. You will become clear after know the basic difference b/w trading and demat accounts. You can read in full detail about both types of account separately on moneycontain.

As an example, suppose you buy shares of Yes bank from your trading account through call to your broker or by using there online trading platform. The moment you buy and the trade gets executed the purpose of trading account is finished.

Now, those shares that you have bought will require a place to get stored, this is where the role of Demat account comes in picture.

These shares gets stored electronically to your demat account, so that in future when you want to sell them, like after 1 month or even after 3 days or 10 years, you can easily do so by a click. 

In brief trading account is where your buy and sell orders get executed whereas demat account is where your shares are held(stored).

One more good to know info is that there are two depositories in India who offers you DEMAT account & there is no difference in terms of operation or quality of service.

This is your choice to decide which one you want to go and sometime it depends upon your broker too(as they also select which depository they want to associate with).

  1. National Securities Depository Limited (NSDL)
  2. Central Depository Services (India) Limited (CDSL)
     

In other words, a Depository is a financial mediator who offers the service of Demat account.

Note: You do not need to go to them directly for opening Demat account. Just contact your broker where your trading account is opened or you are about to open it.

That’s all you need to know about them, until you are doing any study or courses related to finance. You can learn in more detail here.

 

What is Stock Exchange?

Just like normal markets from where you buy (as consumer) and sell (as manufacturer ,distributor etc.) For financial products like stocks, bonds, commodities, currencies, derivatives, and so on there is a place which is known as Stock exchange.

It helps all kind of investors and traders to participate in different financial products as per their choice.

 

National Stock Exchange of India(NSE) and BSE Ltd. both deals in this segment of market mentioned below.

 

However one more good to know info is there is something called OTC(over the counter market). If a stock does not trade on a listed exchange, it can still trade in the over-the-counter (OTC) market, which is a less formal and less regulated venue.

These OTC-traded shares typically will involve smaller (and riskier) companies, such as penny stocks, since they may not meet the listing requirements for established stock exchanges.

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How Many Stock Exchange are there In India?

There are 5 major stock exchanges in India:

  1. National Stock Exchange of India(NSE) Ltd.
  2. BSE Ltd. formerly known as the Bombay Stock Exchange Ltd.
  3. Indian Commodity Exchange Limited(ICEX)
  4. Multi Commodity Exchange of India Ltd.(MCX)
  5. National Commodity & Derivatives Exchange Ltd.(NCDEX)

You might be thinking as if now, there are so many exchanges which one should you go for or why there are so many exchanges? Do not worry our main focus will primarily be on nse & bse.

As a beginner one should always start with easy things just like in math until you know simple rules of calculation like add, subtract, multiply, divide it is not worth learning algebra, statistics or integration, differentiation.

So will stick to basics first, however let me tell you few things good to know about these exchanges.

National Stock Exchange of India(NSE) and BSE Ltd. both deals in this segment of market mentioned below.

 a. Equity

b. Equity Derivatives

c. Currency Derivatives (including Interest Rate Derivatives)

d. Commodity Derivatives

e. Debt

NSE Trades in
BSE Trades in
Equities, ETFs, IPOs, OFS, Mutual Funds, Index Futures, Index Options, Stock Futures, Stock Options, VIX Futures, Commodity Derivatives, Single Currency Futures, Cross Currency Futures, Single Currency Options, Cross Currency Options, Interest Rate Futures, Government Securities and Corporate Bonds
The BSE also provides trading in all of the above except VIX futures. The volumes on equity futures and options are larger on NSE than on BSE

 

There are multiple segments or you can say financial products available just like a supermarket. It’s up to you to choose, the other exchanges mentioned above except these two deals only in Commodity Derivatives.

So at-last here is quick revision through a image about who all participate in stock market:

 

How Share Market Works? Beginners Complete Guide

 

Attention: Right now our only focus will be on Equity also know as cash segment. As a beginner in share market one should always start with this financial product. You can Read About What Is Nifty? Here.

 

How To start in share market?

As I mentioned above we will be dealing only with equity segment as of now, as this is the starting point for any beginners who dreams to earn money online through trading and investing in share market.

To know how share market works it is import to know, what exactly is equity?

 

What is Equity?

In layman terms equity is nothing but ownership. There are various types of equities however in stock market world it is known as shares or stock. How much you own a equity in a particular stock refers to as equity holding.

In the accounting terminology or corporate world, equity (or more commonly, shareholders’ equity) means the amount of capital contributed by the owners.

In other words the difference between a company’s total assets and its total liabilities. If a person owns 1000 shares of total 100000 shares, then he owns 1% of the company.

 

What is Equity?

 

In the real estate sector, equity refers to the difference between an asset’s market value and the debt owed on the asset. 

 

What is Assets?

Here is the book definition which says, An asset is a resource with economic value that an individual, corporation, or country owns. In simple terms a useful or valuable thing.

You might have heard people saying ‘my friends are my assets’.

Types of Assets, see the image below:

 

 What is Assets?

 

 

What are liabilities?

In layman term, Liability means credit that’s it. Credit of an individual like loan, bills or a debt of an organization payable to banks or other lender. You can say it is a thing for which someone is responsible, especially an amount of money owed.

Types of liabilities check the image below:

 

What are liabilities?

 

Now that you have a basic understanding of what equities, one should know a little about IPO(initial public offering) in the next section will discuss this in brief and than will move directly to how you can start trading and investing. So let’s jump straight to it.

 

What is IPO?

Initial Public Offering (IPO) is a process through which any company offers shares to all investors(institutional or big investors, retail investors(common people).

Through IPO, a company is actually letting common investors to be part of their company through investing their individual money.

When a company decides to file for an IPO, it will issue shares in public domain with a predetermined price band(Rs.50, 100, 200 etc.), investor who thinks that this company is worth investing, they will apply for its IPO. This money helps companies in various ways. For example:

  • The money that gets generated through IPO helps in growth and expansion.(increasing production, manufacturing units, manpower etc.)
  • Through IPO company can also avoid more debt or loan, which increases more profitability.(lesser debt means lesser interest to pay) 
  • Due to share listing a company credibility also gets increased, which helps to obtain better terms when seeking funds from banks or large investors.
  • One more important thing which can be called negative for investors but positive for company is risk. By involving large people they are reducing risk to their business, as being investor you own certain percentage(as you hold shares of that company), if company fails to delivery in future, there shares may hit, company valuation will be down and your money will be lost.

Take this truth as pinch of salt’ but it’s indeed true that you are now part of the risk as a part of the business. But this is also truth that no business can happen with zero risk.

You might have heard of a famous Bollywood Hindi movie inspired by the life of Dhirubhai Ambani named Guru, in which he goes to public to give funds so that he can expand his business, similar to that happens when company launches IPO. By the way reliance went for public offering in the year 1977. 

List of major IPOs launched in 2019:

 

list of major IPO's launched in 2019

 

  • The date on which a company make new issue of securities to the public. For example, as seen in above image, IRCTC offer date is 14, oct 2019 this is said to be the issue date for its IPO. It is also called the offering date.
  • Offer price is the predetermined price band we talked about, this was the price offer available for investors to buy shares before ipo launches and shares get listed on exchange.
  • List price is the price at which the shares get listed on exchange, so in case of irctc Rs.320 per share, was what you have bought shares, and on the day it got listed on exchange , the listing price is 626, it simply means the 1 share you bought by giving 320 rupees is now available for you to sell at 626. This is huge profit with less than 10 -15 days of investment. You can expect this kind of return from other thing.
  • LTP means last trading price, this is the price at which the share is trading in the stock market now. so if you have kept your investment even after it got listed on exchange, you would have end up earning about 1400 per share within a span of 2 to 3 months.

You can read more about IPO here 

 

How many Types of Investors are there in share market?

 

Below image tell us the types of Investors in share market

 

However, we are not going to understand the role of each investors here. General public belongs to retail investors category and bid for shares under same during IPO.

Not to mention, companies has to go through lot of paper works and hard procedure before filing for IPO in front of SEBI, So do not think that any outsider or anyone can walk up and say ohh lets go to public to raise funds. You have to present the objectives, your companies growth in previous years and lot of other things.

You might have question in your mind that, how you can apply for IPO? It’s very easy, just like transferring money online to your friend using any App (phonepay, patym, google pay) etc.

Remember we discussed about brokers above, most of the brokers will provide you the online platform to apply. During the bidding process you can bid for shares at a particular price within the specified price band, just need to enter the price band, quantity and make payment.

This whole process where one bids for shares, is referred to as the Primary Market. On the other hand when the stock gets listed and debuts on the stock exchange, the stock starts to trade publicly.

This is called the secondary market. Once the stock gets listed it gets traded daily on the stock exchange.

Now you can start buying and selling stocks regularly. So this is how share market works in real.

Below image represents the same in totality of how share market works step by step.

 

how share market works step by step

 

The reason I want you to have a basic understanding not deep right now, as you are about to begin to enter in to new world of opportunities. It’s always better to know a little more than others for a upper hand.

There is always lot to learn, however until you play cricket or for that matter any other game, just by looking at it might seem hard or easy to you, the best thing is to start playing. What i mean is to experience it and than decide, not just by reading or looking at it.

Hence I would advise you to keep reading best material or blogs online like moneycontain for enhancing your knowledge, at the same time open a trading and demat account with best broker like Upstox, have an experience, it won’t cost you more than 500 bucks to start trading.

But with little caution, hold your horses and do it with little money, until you learn enough as  “For learning there is no limit“. 

Now we are at the juncture where it becomes important for you to know about Margin. 

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How margin works in share market?

Margin in stock market refers to buying/selling of securities (shares) by borrowing money from your broker. This is very much similar to taking loan for short period of time.  Let us understand this with a simple example:

Suppose you want to buy shares of Tata motors currently trading at Rs.80. You have 1000 rupees in your trading account , how many shares you can buy with this money?

80*12=960, so approx. you can buy 12 shares, although with this low quantity, the profit you will earn if the shares prices move 1 rupee up and down is only 12. This does not look attractive at all.

That is why the brokers would provide you margin to trade with larger quantity. So they will give you 10 to 20 times margin(may be more), now multiply your initial investment 1000*10 or 20, you will have much more money to buy the stock and with more quantity.

Now the profit per share will be more as the quantity got increased.

Sounds attractive now, as your 1000 becomes 20,000 and with that you can buy at least 240 shares in case of Tata motors, and per 1 rupees movement will give you 240 bucks. Take it as an extra power given to you, now it’s up to you to decide whether you want to use it or not.

Hope you have understood the basics of how margin works in share market. I am just trying to make you understand in simple terms I can use high technical, financial  jargons, but as an beginner it does not make any sense.

 

How buying and selling of shares work in stock market?

One more important concept i want to make clear to you in share market you can buy or sell shares. Sounds easy, but you may ask how can i sell shares if i do not have bought it at first. This type of trade does not happens in normal day to day life. To sell something you have to buy it first.

Stock market works on constant buy and sell demand, suppose there is a company named xyz trading on exchange at 100 rupees per share, it issued 100 shares in total, trader A purchase 10, trader B, 50 and trader C, 40.

Now as the company is performing good the stock kept on moving from 100 to 150, but there are no seller than to whom trader A,B,C will going to sell their shares and book profit.

That is why we have both buyers and sellers in market trading and investing simultaneously depending up on there research based on business news, blogs, different technical tools, analysis or tips. So without both the market won’t exist at all.

Now you may ask than why would one invest at all, if the shares will going to fall, see in the long term if the company continue its growth trajectory, build more manufacturing units, have no debt, its profit sharing is rising, people are buying or using their products more, than nothing can stop itis share to rise.

As demand for the stock picks up more investors would buy the stock at higher prices and that is how the price goes up.

In like manner plunging revenues, Higher financing cost, Declining profit margins or something as simple Management misconduct or slumping sales can bring down the share price.

So the price of a share goes up and down with financial condition of a company ,economy of a country and its market participants.

However, we are talking about the day to day trading that happens at stock exchange. The daily movement of stock engages enthusiastic traders across world to trade and have quick money within a hour or day. 

Caution: The problem of trading with higher margin is, similar to profit, your losses too can be high. So while trading you have to take care of this very cautiously. That is where the learning helps, the more you are aware, the less you make mistakes. Now that you have known margin, its correct time to bring the topic of types of trades take place in share market.

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What is Intraday trading and how it works in stock market?

Intraday trading also known as day trading, is type of trade that happens within a day. So this is what happens, when you are placing your trades as intraday:

Note: we will only be discussing about equity(cash) market here, this does not apply to commodity or currency as the timings are different although the rules remain the same.

Equity and equity derivatives timings in India is morning 9 a.m. till 3:30 p.m. Avoid the equity derivative as of now, it is much different and requires more learning, but you will gather with time, as a beginner just focus on to Equity only for now.

  • You can buy or sell shares even for a minute or hour or before the market gets closed.
  • Suppose PNB(Punjab national bank) is trading at Rs.40, you bought 1000 shares now you can sell this shares just after you bought it or can keep it for 1 or 2 hours or before the market gets closed.
  • You have to square off (to close your opened position) before the market gets closed same day.
  • Brokers usually have a dedicated team named RMS(risk management system), they will auto square off your all opened position, if you do not do it from your end, at whatever market price that share is trading.
  • Brokers usually do auto square-off  before the exact market closing time mostly it happens from 3:15 till 3:25.
  • So whenever you place order as intraday keep in mind to select MIS(Margin intraday square-off). This is the type of order you select while trading intraday.
  • You can convert your intraday position to delivery also known as CNC(Cash and carry), however you should have complete margin amount in your trading account to do so before market gets closed.

 

Equity Market timing in India:
  • 9 am to 9.15 am – Pre-market
  • 9.15 am to 3.30 pm – Normal trading
  • 3.40 pm to 4.00 pm – Post-market

Read More about Intraday and delivery trading

 

What is Delivery trading?

Opposite to intraday trading in delivery trading . If you have placed order as CNC, cash and carry order type or delivery order type, than you first require full margin to place the order . So if you are buying let say HDFC bank shares, trading at 800 per share. You have to have the full 800 to place the order.

Once you have placed the order, you can still sell the shares before the markets gets closed, however this time RMS will recognize your order type as delivery and will not square-off your open position. This shares will get deliver to your Demat account.

You can keep those shares as long as you want or sell it whenever you feel so it’s totally up to you. Below image tell us in brief about difference between intraday and delivery based trading. 

 

What is Intraday trading and how it works in stock market?

 

How many types of orders you can place in stock market?

Placing order simply means, how much quantity, at what price, at which price to sell, which stock you are buying, it is like filling a form. You need to give details before your trades executed on the exchange, it let exchange know what exactly you were looking for.

You place order either on the online platform provided to you by broker or through calling your broker.

Placing orders by yourself help in saving much of time, instead of calling your broker to get connected and than letting them know. However, always check twice what you have filled as once you place the order and it gets executed there no going back.

This is very important to know as you will use it every time you want to trade in share market. Depending upon your broker the name might change but the purpose remains same. So let us discuss them one by one:

What is Market order?

A market order is an order to buy or sell a stock at the current price the stock is trading in market. So when you place such order whatever price the stock is trading at, your order will get executed at that rate.

So, suppose you placed market order for ABC, stock trading at 100, although it takes few seconds for your order to sent to exchange and it might happen that the stock price have fallen or rose to few points(100.40, 99.30 etc).

This happens because prices fluctuate ever microsecond. The latest-traded price also know as LTP in the market may have changed by the time you place (bid) your order. Generally, this type of order will be executed immediately. However, the price at which a market order will be executed is not guaranteed.

What is Limit order?

On contrary, a limit order is an order that places a limit on the price you are willing to pay to buy or sell a stock. Thus, a limit order guarantees a price, but whether the trade will get executed remains uncertain. This is because the stock may not reach the price at which the order is placed during the trading day.

So suppose you placed a limit order to buy a stock when its trading at 100, you put a price to buy it at 105, however the stock did not reach to that price, so exchange did accepted your traded but the order remain un-executed as the price of the stock did not came up.

What is Stop Loss order?

From the name itself, it tells you to stop your losses. So when you place order you cannot be 100% sure the price of the stock will move in your favor, it may move in opposite direction significantly. So to avoid your losses you can place a stop-loss at a particular price.

let say you bought the stock at Rs.50, it fall to Rs.40, if you have placed a stop loss at 45 than the maximum losses would have been restricted to Rs.5.

That is why it is always advisable to put the stop-losses, whenever you are trading, as in any given situation you cannot be 100% right. 

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What is Cover order (CO)?

Cover order is a combined of this three orders we have learnt above. By placing CO order you can use all three order types in a single window. What i mean to say, you can buy (or sell) shares with keeping it as market price or limit price and can also put a stop-loss. 

Let us take an example to understand it better:

Suppose you want to buy a share however you want to buy it a limit price of your choice. Currently stock is trading at Rs.80 you can place a cover order by keeping the buying price at Rs.75 and stop loss as Rs.70 .The moment stock comes to Rs.75 or lower than that your limit order will get executed & stop-loss order will be placed.

In case if stock fall to Rs.70 this stop-loss order will also get executed. You can see your profit/loss in admin position.

One of the major benefit of cover order is, it reduces your risk or exposure in market. By using cover order, you are lowering your risk and ensuring that your losses are limited.

Moreover you will get additional leverage or margin if you use CO order. You can place cover order only for intraday trades not for delivery based.

What is Bracket Order (BO)?

Bracket are very interesting,  in this types of order you can place buy/sell price, at limit or market rate, with a a stop-loss and a target fixed The benefits of multiple orders placed through bracket order is, it allows you to fully automate your trade.

As you have already given all the information to exchange about your order, you risk get reduced and the margin offered to you by broker gets exponentially high.  Similar to other orders it is only useful if you are placing intraday trades.

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What is AMO (After market orders)?
Place orders for the next trading day the previous day itself. AMO orders can be placed only during the following time duration –

Equity – 3:45 PM to 8:59 AM

Currency – 3:45 PM to 8:59 AM

F&O – 3:45 PM to 9:10 AM

MCX – Anytime during the day, if placed during the market hours the order will go through the next day.

Last but the not the least is product codes, i have already informed you about them above, As an revision let me explain them in brief. The name may be different across various brokers .

You can read more about types of order here.

 

What is Margin Intraday Square Off (MIS)?

MIS as a product code is used for trading Intraday Equity, Intraday F&O, and Intraday Commodity Trading. You enjoy additional margin using the MIS product code.

All the positions under the MIS product code will get automatically squared off, if you do not do it from your end before the market gets closed.

Depending upon your broker the timing for auto square-off may vary 3:15 to 3:25 usually. Some brokers do charge for auto square-off trades so check with them while opening your account.

 

What is Cash and Carry (CNC)?

CNC  is used for delivery based trading. You will not get any leverage nor will your position be auto squared off if you use CNC. You will not be able to sell using the product code CNC without holding the particular stock in your demat account. Moreover you won’t get any margin if you use CNC as a product code.

 

What Is Order Conditions In Stock Market?

A Trading Member can enter various types of orders depending upon his/her requirements. These conditions are generally classified into two categories: time related conditions and price-related conditions. We have already covered price related conditions above.

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What Is Time Conditions Order Type?

IOC – An Immediate or Cancel (IOC) order allows to buy or sell a security as soon as the order is released into the market. In case if orders is failed then it will be removed from the market. There are chances of Partial match for the order, and the remaining unmatched portion of the order is cancelled immediately.

DAY – As the name suggests, a day order is valid for the day on which it is entered. If the order is not matched during the day in market, the order gets cancelled automatically at the end of the trading day.

Below image represent what you need to do step by step:

 

How Share Market Works? Beginners Complete Guide

 

Once you have placed order – broker will send it to exchange – Exchange will find counterparty – Exchange than confirm to broker – Broker debit/credit your account depending on your order type.

 

What Is share market timings in India?

Equity:
  • 9 am to 9.15 am – Pre-market
  • 9.15 am to 3.30 pm – Normal trading
  • 3.40 pm to 4.00 pm – Post-market
Commodity:
    • Internationally Reference-able Non-Agri Commodities – 9 am to 11.30 pm – during daylight savings time – March to November (9 am to 11.55 pm – November to March)
    • Internationally Reference able Agri Commodities (Cotton, CPO & RBDPMOLEIN) – 09.00 AM to  09.00 PM (9.00 AM to 9.30 PM – November to March)
    • All Other Agri Commodities – 09.00 AM to 05.00 PM

Currency: Indian Currency market trading hours are from Monday to Friday From 9:00 a.m. to 5:00 p.m 

 

Conclusion

Vision of moneycontain is “seeking wealth”, although you need to understand wealthy people make different choices. You don’t need an first-class MBA or a Finance degree to know how to invest in stocks.

Some of the best investors in India, (likes of Radhakishan Damani he is a B.com college dropout, owner of D-mart and renowned investor) and around the world come from very normal academic backgrounds.

Indians are getting richer, and the common man is wondering where do the rich invest their money? While a common man in India, is seen securing his wealth in real estate and gold, a majority of the affluent class people in

India are seen investing in financial investments, including stocks, mutual funds and other alternative wealth building investments like (PMS) .portfolio management services.

With the equities market performing consistently well, investments in stock market offers good returns. You might be earning money through a job, somewhere at some part of this world, but that money is active, it is there till you are working.

To be wealthy you have to develop habits of making your money passively. So even while you sleep, the growth is continuous. You do not need to worry if tomorrow your job is lost or your boss fire you.

You can start trading or investing with as little as Rs.500, there is no compulsion. The amount of money or wealth you can create is unlimited, it up to you to decide when to start. In the end remember this “Perfect is the enemy of good.” So keep learning.

So this was in brief I would say, how share market works. I would advise you as a beginner to please read some technical indicator and tool like what is support and resistance?

Also check what is candlestick charts and how to read them?

Best moving averages for day trading, it is a must read for beginners to get a best start in stock market world.

If you want to know about the derivatives market than learn how futures trading works here.

Also check and learn the basics of Option Trading here.

Open Best Trading/Demat/Mutual Funds Account Within Minutes Online paper-less and start trading & investing online in stocks, derivatives, commodities, currencies, mutual funds and ETFs 

Looking to make any investment in mutual funds than you should use free moneycontain Mutual fund SIP calculator here.

You can Open a free Groww trading/demat account and get Rs.100 as a one time offer when you open through this link.

If, you have liked the content please do share it with your friends or on social media, as sharing do bring the good karma. If you have any questions or feedback, you can let me know in comment box below. I will try to answer as many as possible. 

Note: Please do not take this as any recommendation, to trade or invest. This is just for reference, to make you understand about how share market works, under no circumstances intended to be used or considered as financial or investment advice, a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset.

Please do your own research and make investment. Moneycontain will not be responsible for any of your losses at all. The point made is for educational purpose only. All investments are subject to risks, which should be considered prior to making any investments.

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