Beginner’s Step-By-Step Guide to Buy Stocks Online

Online trading has taken off hugely in Indian stock markets. This is because buy stocks online isn’t as tough as it sounds. However, you’ll have to research and learn all the trading terms before making your first purchase. 

 

In today’s digital age, you can buy stocks online with a few clicks. The following steps will help you learn how to buy shares online.

 

 

• Be Careful while selecting an online broker.

 

You can buy stocks online on the broker’s website in minutes after opening and financing your account. Another way is to approach a full-service stockbroker or purchase stock directly from the company.

 

It is as simple to open an online brokerage account as it is to open a bank account:

• Fill out an account application.
• Submit identification.
• Decide whether to fund the arrangement with a cheque or electronically transfer funds.

 

Whether it’s the smooth implementation or research on perfect stock suggestions, you can decide between bargain brokers and full-service brokers. A close look at the broker’s follow-up services and backup order placement options will give you an idea of their efficiency.

 

• Open your trading and Demat account

 

Whether you want to buy stocks online for short-term or long-term delivery or intraday, you need to fund your trading account. You can transfer your fund to the account through NEFT, IMPS, or UPI. If you deposit a certain amount, the online broker will permit you to place orders.

 

• Research the stocks you want to buy before placing the order.

 

After you’ve financed your brokerage account, it’s time to buy stocks online. An excellent place to start is examining firms you already know from your consumer experiences.

 

Don’t let the torrent of data and real-time market volatility overwhelm you while conducting your investigation. Keep your goal simple: you’re looking for companies you want to invest in. Once you’ve chosen these businesses, it’s time to perform additional research. Begin with the annual report of the corporation, specifically the annual letter to shareholders from management. The document will provide you with details of what’s going on in the business with contextual data for reference.

 

One of the benefits of buying stocks online is that you can read research reports, screen stocks for profitability, ROCE, and ROE, among other things, and place orders quickly. Many brokers also provide a “call to action” service. You can read the report or stock suggestions and then place your order with only a few clicks from that location.

 

• Select the price and type of order

 

There should be no pressure to buy a certain amount of shares or to load your entire portfolio with a single stock. Start with paper or mock trading on a stock market simulator to see if your experimentation with stocks is going the right way. Paper trading teaches you how to buy and sell stocks using no money.

 

 If you’re willing to put down actual money, you can start small and buy only one share to get an idea of what it’s like to own individual stocks and whether you have the endurance for the rough periods. As you get a firm grasp of the shareholding reins, begin advancing your position.

 

Right before placing an order, you can use online technical charts to determine the ideal entry-level for the stock and set stop losses accordingly. Make an effort to acquire the most acceptable deal available. Pay attention to how you make the order. 

 

For example, if the marketplace is turbulent, try placing a limit order to ensure that you obtain the price you want or better. If you’re purchasing in a declining market, you can utilize a market order to get the most excellent price.

 

• Once you place the order, follow up.

 

Your work does not end after you place the order. Check to see if the order is correctly reflected in the order book. You must consult the trade book to determine the status of execution. The trade book only shows executed transactions, whereas the order book only shows open orders. If you are unsatisfied with the pricing before the order is completed, you may easily cancel it or change the order price and quantity. You have complete control over the level of secrecy. After the trade is made, do a weekly reconciliation with the Demat account, the ledger account, and a cross-check with the contract notes in the evening.

 

What’s the checklist  to start stock trading in India?

 

Step 1: Get a PAN card

 

Securing a Permanent Account Number (PAN) is the first step toward stock market investing. PAN is a 10-digit unique alphanumeric number assigned to you when registering for the PAN card. The PAN card gives a proper identity to every Indian citizen. PAN is used by the government to calculate your tax dues and is required when opening a Demat and trading account.

 

Step 2: Open a Demat Account

 

It’s mandatory to open a Demat Account before purchasing shares online. A Demat account, also known as a Dematerialized account, is where actual shares you own are converted into an electronic format.

 

You can open a Demat Account on your own by contacting the Depository Partner directly. This procedure does not necessitate the use of a broker or any other third-party authority. The steps are as follows:

 

1. Find a DP on the CDSL or NSDL websites.
2. Once you’ve found a DP, call them and ask them to set up a Demat Account for you.
3. The Depository Partner will give you an application form. Complete this form with the necessary KYC details and send it to the DP.
4. Include a copy of your identification and address evidence (PAN, Aadhaar, voter ID, utility bill, ration card, etc.).\
5. Attach your latest three months’ bank account statements or passbook.

 

The DP will validate all of your details before opening your Demat Account. You will be sent an agreement outlining your rights and responsibilities as an investor. After which, you will get an account number and a password to access your Demat Account. Attach your latest three months’ bank account statements or passbook.

 

When you open an online Demat Account, you will be assigned a unique Demat Account number. This account number is significant because it is required when purchasing or selling shares. A Demat Account is similar to a bank account in that you may deposit and withdraw funds. Your account is credited or debited in proportion to the number of shares acquired or sold.

 

Step 3: Open a Trading Account

 

A trading account is used to give and take stocks on the stock exchange. Once you have a Demat Account, you will need a Trading Account to complete the transaction. When buying shares online, you must also enter your Trading Account number. 

 

Step 4: Registering with an Online Broker/Brokerage Platform

 

You cannot buy stocks straight from the stock exchange. Instead, you must avail the services of a broker. A broker is an intermediary who buys and sells stocks on the stock exchange on behalf of you. The Securities and Exchange Board of India (SEBI) is the Indian regulatory organization responsible for broker certification.

 

Step 5: Ask your broker to help you link your trading account with the Demat account

 

To connect your trading account to your Demat account, you’ll need a bank account. You can only buy shares online if you have a bank account. Your broker will assist you in completing this formality.  

 

Once this is done, the broker will forward the transaction to the stock exchange for settlement. The shares will reach your Demat Account within two business days of payment. In addition, the proper adjustments or purchase fees will be deducted from your bank account.

 

Step 6: Check if you have got your Unique Identification Number (UIN)

 

SEBI has made it mandatory for investors to obtain a UIN to create a database of all Market Participants and investors. A UIN can be obtained from NSDL-appointed Point of Service (POS) agents. However, a UIN is only required if you are trading with a capital of INR 1 lakh or more.

 

After mastering the six steps outlined above, you’re ready to buy stocks online. When you make a purchase order on the stock exchange, it is paired with a corresponding sale order. The quantity of shares acquired is credited to your Demat Account after the settlement.

 

What are the basic stock definition terms?

It’s natural to be taken off-guard when you look at certain words and the values beside them on your broker’s online order page. We have created a cheat sheet of basic stock trading terms with their meanings.

 

Sl.No	Term	Definition
1	Ask	For buyers: the price at which the trader/investor  is willing to sell the stock to the buyer.
2	Bid	For sellers: This is the price at which buyers are prepared to pay for the equity to sellers.
3	Spread	The gap between the highest bid and lowest ask price.
4	Market Order	A request to acquire or sell a stock at the best price available as soon as possible.
5	Limit Order	A request to purchase or sell a stock at a specific or higher price.
6	Stop (or stop-loss) order	When a stock reaches a predetermined price, known as the “stop price” or “stop level,” a market order is executed, and the entire order is completed at the current price.
7	Stop-limit order	When the stop price is achieved, the trade becomes a limit order and is restocked to the set price restrictions.

 

Though there are a lot more complicated trading moves and order types, investors have reaped profits by solely using two types of orders: market orders and limit orders.

 

• Market Order

 

A market order indicates that you intend to purchase or sell the stock at the best available market price. Because a market order has no price parameters, your order will be executed quickly and filled unless you attempt a takeover by purchasing a million shares.

 

Don’t be startled if the price you pay as a buyer or accept as a seller differs from what you saw just seconds before. Throughout the day, bid and ask prices fluctuate. As a result, a market order is best employed for purchasing stocks that do not have substantial price movements like large-cap blue-chip firms. 

 

What are the other important pointers about market orders?

 

• A market order is better for buy-and-hold investors than those who immediately react to slight price fluctuations.
• If you place a market order after the markets have closed for the day, your order will be considered at the prevailing price when the exchanges reopen for trading.
• Examine the transaction execution disclaimer provided by your broker. Some low-cost brokers group all customer trade requests together and execute them all at once at the current price, either after the trading day or at a particular time or day of the week.

 

• Limit orders

 

With a limit order, you have more say over the amount at which your trade is completed. If XYZ stock is trading at INR 200 per share and you believe a price of INR 195 per share is in line with how you value the firm, a limit order instructs your broker to execute your decision only when the asking price falls to that level. A limit order requires your broker to sell the shares once the bid reaches your chosen level.

 

Limit orders are valuable for investors who buy and sell smaller-company stocks, likely to have bigger spreads depending on investor involvement. They’re also helpful for investing during short-term stock market instability or when the stock price is more significant than order fulfillment.

 

Additional conditions can be added to a limit order to regulate how long the demand remains available. An “all or none” (AON) order will only be executed if all of the shares you want to trade are accessible at your price limit. Even if the order has not been fulfilled, a “good for day” (GFD) order will expire after the trading day. A “good till canceled” (GTC) order is valid until the investor cancels it or the order reaches expiration. The expiration process might take anywhere from 60 to 120 days.

 

Other facts about limit orders:

 

• While a limit order fixes the price you’ll receive if the order is executed, there’s no assurance that the order will be fulfilled or not. 

 

• Limit orders are processed on a first-come, first-serve basis.

 

• Limit orders may incur more commissions than market orders. A limit order that can’t be filled in full at one time or on a single trading day may be done over multiple days, with transaction fees levied each day a trade is conducted.

 

When should you diversify your portfolio?

 

We hope that your first stock purchase starts a long successful investment process. But, if the going gets tough, keep in mind that every investor, including Warren Buffett, passes through rocky times. The key to long-term success is maintaining your perspective and focusing on the things you can control. Market gyrations are not one of them.

 

Once you’ve mastered the stock-buying process, you can branch into other investment industry sectors. Consult your broker if mutual funds investment fit into your investment strategy. Try to establish a retirement corpus as well. Setting up a brokerage account and purchasing stocks is a good start, but it is only the start of your investment experience.

 

You can invest in a variety of asset types, such as gold, real estate, and mutual funds. However, history has shown that stock markets provide the best profits. If you want to maximize your capital appreciation and receive the maximum market returns, you should consider investing in stocks and securities. If you invest in stocks for the long term, you can accept up to 16% returns, giving you the potential to build wealth. 

 

So when is the right time to expand your portfolio? Consider diversifying once you are 1-2 years into stock trading. Always remember to diversify slowly, as any hasty decision would result in selling investments at losses. To prepare yourself for any future economic crisis, begin investing in gold and international funds. Though gold is not known for yielding high returns, it acts as a hedge and gives downside protection to your portfolio when stock prices dramatically fall.

 

FAQs

 

• What do you need to check before buying stocks?

Before purchasing a stock, you must first determine your time horizon, as it’s critical in determining whether or not to purchase any stock. Depending on your financial objectives, your time horizon can be short, medium, or long term. If you want to buy a stock and possess it for less than a year, you should invest in reliable blue-chip stocks that pay dividends. The companies have a high financial sheet and face less risks. For long-term investing, invest in high-quality emerging-market stocks with a modest amount of risk.

 

• How many shares do you need to buy if it’s your first time in share trading?

Start by buying one share of any blue-chip company and observe the price fluctuations before selling it. If you are unable to control your losses with one share, then you can decide if you want to continue or stop share trading.

 

• Which is the easiest way to buy stocks online?

The most simple way to buy stocks is through an online brokerage account. If you consider yourself a hands-on investor who enjoys investigating companies and researching markets, an online brokerage account is an excellent option to begin buying stocks.

 

Interested in how we think about the markets?

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