We have already discussed in previous blog about opening Dmat & Trading account, which are required to invest in stock market. Stock, which is actually ownership of a company, can be traded only if the company is enlisted in stock market. Indian stock market is open from 09:30 Hrs to 15:30 Hrs from Monday to Friday except holiday. Anyone, having Dmat & Trading account, can Buy or Sell stock and should be well aware of the following terminologies ....
Market Order :
- If we place Market Order (Buy or Sell), the order will be executed at market price. For example, If you want to buy a stock "X" which has a current price of 200, the market order will be executed at 200.
- The executed price may not be same as the price which we see during placing order. For example, while placing market order on "X" company, we saw market price of 200. But executed price is 201. This is because of fluctuating stock price which is changing every moment. The price actually reaches 201 while executing the market order.
- The market order will definitely be executed and will not remain pending. But we do not know the exact price at which it will be executed.
Limit Order:
- If we place Limit Order (Buy or Sell), the order will be executed only at a price which we mention in the order. For example, If we want to buy a stock "X" at a limit price of 190 and it has a current price of 200, the order will be executed only when stock price reaches 190.
- The executed price must be same as limit price.
- The limit order may not be executed and remain in pending condition if price of stock does not touch the limit price.
Stop Loss Order:
- Stop Loss Order is placed to stop or reduce losses.
- Stop Loss Order is placed with a trigger price indicated by the trader or investor. The Order gets executed when market price touch trigger price.
- Suppose you have one stock "X" in your portfolio which has market price of 200. You don't want to allow stock price to go below 190. So, you will place Stop Loss Order (Sell) with a trigger price of 190. If stock price decreases and touches 190, your stock will be sold, otherwise stock will exist in your portfolio and placed order will remain in pending state.
Intraday Trading:
- Buy and Sell of stock will be executed on the same day. For Example, if you buy 10 nos. of "X" stock in Intraday Mode, you have to sell all 10 nos. "X" stock on the same day. If you do not sell, stock will be automatically sold on the same day before closing hour of market i;e; 15:30 Hrs.
- Sell and Buy of stock will be executed on the same day. For Example, if you sell 10 nos. of "X" stock (without holding the stock in portfolio) in Intraday Mode, you have to buy all 10 nos. "X" stock on the same day to neutralise the market. If you do not buy, stock will be automatically bought on the same day before closing hour of market i;e; 15:30 Hrs.
- Intraday Mode of buying-selling are for Traders and not for Investors. Traders do this kind of trading for short term profit and this is very very risky. Chance of getting profit in Intraday is very much uncertain as too much speculation and gambling is associated with this kind of trading.
- Investors put their money in long term scheme and hence they should never play Intraday mode of trading.
- Technical Analysis of Stock is much required for Intraday Trading.
Delivery Trading:
- In Delivery mode, you can buy any stock from stock market and can hold it for as long as you want and can sell at any time. For Example, if you buy 10 nos. of "X" stock in Delivery Mode, you can sell any number of stock holding in your portfolio at any time, say after 5 days or 5 months or 5 years.
- Delivery trading is done by long-term investor with huge-market research and mendasar analysis of stocks. Less risk is involved in Delivery Mode operated by wise investors.
- Fundamental Analysis of Stock is much required for Delivery Trading.
Happy Investing !!!
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