Basics of Trading and Account Types to Begin Trading
Trading online seems all fun and games, doesn't it? One just opens an online trading account and begins to make money. Or, does one make money? How does one make money? By trading on the market stocks and shares of course. It is not that simple. You need to know a few things first.
Choose a low brokerage dealer
First, you need a broker offering Low brokerage in India. You do not want to keep on paying money for everything, do you? Now, go and open your account. What are the diverse types of accounts? Usually, one opens a cash account. It is simple and straightforward. You deposit cash into your account and begin to make trades by buying stocks, bonds, mutual funds, and more.
Various account types
The next type of account is the margin account. This is more exciting but like always there is the risk that you lose money and it is more so in this case. You borrow money against the cash and securities in your account from the broker. You need some expertise when you trade this way.
The next thing is the options account. In this, you trade with options. This is riskier than trading with stocks or bonds. Therefore, only people with experience should consider doing options trading.
And, you have those who are trying to save money for their retirement. For these people, we have the individual retirement account. It has its own advantages and risks.
Watch the market carefully
The money in your account in the trading account will keep getting interested if you just let it sit there. But, at times, the market might move and the interest rates will drop. This means the interest you get from your account will decrease. You begin to lose money. So, if you see or anticipate a drop in the interest rates, you should withdraw the money and deposit in a place where you get better interest.
Doing margin trade
When you do margin trade you are borrowing money from your broker to do the trade. You add your share of the cash and do the trade. Since this is a loan, the broker will charge you interest for the loan. The interest rate is given as an annual rate of interest but you might also calculate the interest payable daily. When you open the account check with the broker what the annual rate is and how many days of the year is considered for the calculation. Many brokerage houses use 360 days only instead of the 365-full year.
The lowest brokerage is offered by the discount brokers. They charge only a nominal Rs 15 – Rs 25 per transaction. The full-service brokers charge 0.5% on the transaction amount. If you make a transaction for Rs 40,000, they will charge you Rs 200. If you keep using the regular full-service broker, the charges will be double or even triple what you pay to discount brokers.
If you want to migrate from one broker to another, you can do it easily. Get in touch with the new brokerage where you wish to trade and tell them about it. They will arrange the needed paperwork to move to their brokerage.