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Share market and stock market both mean the same thing. Share market is made up of two words share and market where share means share and market means market. So Share Market means a market where (share) shares are sold and bought.
Let us now understand about share in easy language. As we already know share means share. But in what this part happens, we understand all this in complete detail.
Suppose you want to open a hotel. You have complete information about hotel business. But you do not have as much money as you need to open a hotel. What do you do now you go to your friend Rahul and say. Rahul I have a very good idea to earn money by opening a hotel, if I open this hotel then I can earn very good money. But the problem of one thing is that I do not have the amount of money it will take to open a hotel. If you give me money, then both will share in the profit that will be made. Rahul says okay I like your idea, tell me how much money to give?
You tell Rahul that it is taking a total of 10 lakh rupees to open a hotel but I have only 5 lakh rupees. If you give me 5 lakh rupees then we can open this hotel. Rahul says but I have only 1 lakh rupees. You say to Rahul, it doesn’t matter, you give me Rs 1 lakh, out of whatever profit you will get from the hotel, you will get 10% share. Now you must be wondering where did this 10% come from. Let us understand this also. Because the total cost to start the hotel business is 1,000,000 rupees. Out of which 100,000 is given by Rahul which is 10% of 10 lakh.
Now you take the rest of the money from you and your friends and give them a share according to their money invested in the hotel and start your hotel business.
After a few days, you make great profit from the hotel and you want to open more branches of your hotel. But again you face the same money problem. Now you have taken money from your friends too, now they don’t even have money. Now you want other people to invest money in my hotel business. Now you go to a market where you can sell your business stake very comfortably. The name of that market is “Share Market” Example “Bombay Stock Exchange” which is located in Mumbai, India.
Now you go to Bombay Stock Exchange’s office and ask for listing of shares of your hotel business for sale. The officials of the Bombay Stock Exchange ask for some documents from you. After completion of all the documents and legal formalities, the share of your business is now listed for sale in Bombay Stock Exchange. Now anyone can buy or sell your shares from any corner of the world.
Face value is the value of a share that is determined by the company at the time of issue of shares. It is also called Par Value.
When a company issues its shares for the first time through IPO, the company first determines the face value. These face values are the nominal value of a share.
Suppose there is a share whose market value is Rs 100, then its face value can be Rs 5, or a little more or less than that, the face value of any share can be at least one rupee. The face value of a stock has no direct relation to its market value.
The face value is used to make dividend payments, split stock and calculate share premium.
When a company makes an offer to sell shares after getting listed on the stock market, it is called FPO Follow-on Public Offer. When a company needs extra capital, they resort to FPO.
There are two types of trading in the stock market. One intraday trading and the other delivery trading
In intraday trading, you have to buy and sell shares before the market closes on the same day. In intraday trading, you can buy shares worth many times more than the money you have. Due to which your profit and loss can also be manifold. It can be so much that the entire money invested by you can be double in a while and it can also become zero in a while. That’s why there is a lot of risk involved in intraday trading.
Delivery Trading :
Delivery trading is the only method which is actually the best way to do trading in the stock market. You must have heard the name of the investor in all the big stock market like Rakesh Jhunjhunwala They all do delivery trading only. In delivery trading, you buy as many shares as you can hold. For example, if you have Rs 100, you will buy a single share of Rs 100 each and it will go into your demat account.
You can hold it as long as you want. You can keep that stock with you till you make profit. When the price of that share increases and you start making profit then you can sell. Whereas in intraday trading you have to sell shares on the same day whether you are in profit or loss.
You can consider delivery trading as an investment while you can consider intraday trading as gambling.
When you make profit by selling a stock, it is called profit booking. For example, you bought a share for Rs 50 and after some time the price of that share becomes Rs 55. When the share price reaches Rs 55, you have made your profit by selling it, this is called profit booking.
As I have already told that if you do intraday trading then you have so much opportunity that you can make profit or loss manifold of the money you have invested. Let us now understand this in a little more simple language. Suppose you have total Rs 5000 you want to buy shares of x company which cost 100/share.
If you do delivery trading here then you can buy total shares = 5000 / 100 = 50 shares only. But if you do intraday trading here then you have to determine how much loss you are ready to take on 1 share. Now suppose you have determined that I can make a loss of Rs.3 on 1 share. So now you will get one share for just Rs. 5000 /3 = 1600 Means if you have share of x company whose price is 100 but you will get it only for Rs.3, in this way now you can buy about 1600 shares.
Here, if the share price of 100 becomes Rs 103 in a while, then you will earn Rs 4800 in no time. But if on the contrary, if the share price falls by Rs 3 in a short time, then all your money will also be lost.
Everything is fine till here but what if the share price falls by more than Rs 3 . In this way, there can be a very big problem, to solve this problem, “Stop Loss” is used. For the above mentioned process to be completed properly, you have to put a “stop loss” of Rs.97. Just as the share price of X company will start falling and will come down to Rs 97, in the same way all your shares will be sold automatically.
This can save you from a big loss. Sometimes it also happens that there is information about a stock in advance that if the share of this company falls below a particular price, then there is every possibility of it going down further. In such a situation, the use of stop loss is very effective to avoid such losses.
Square off is only one part of intraday trading. As you would know that every stock you buy in intraday trading has to be sold on the same day before the market closes. And if you have sold the shares before then you have to buy the shares before the market closes.
We have already talked in detail about intraday trading. In day trading, the position you buy or sell in the stock has to be squared off on the same day.
For example, suppose Kishan buys 1000 shares of rcom at Rs 3 per share and sells them at Rs 3.5 per share before the market closes by evening. Now you can say the same process in other words that Kishan has squared off the position of rcom in his intraday trading.
Immediate Or Cancel Order (IOC)
An IOC order means an Immediate or Cancel order. Your order will either be completed immediately or will be cancelled. If we understand this in simple language, then IOC is needed when we want to buy a share only at a particular price and if it is not found at that price then we want to cancel the order. For example, suppose you want to buy 500 shares of Lupine Limited at a price of Rs 700 per share, but at the same time you also want that if the share price exceeds Rs 700, then the order should be canceled immediately.
Now as soon as the share price of Lupine Limited is 700, your order will be completed immediately but as soon as the share price is above Rs 700, the order will be canceled. Now let’s understand this in a little more detail. As soon as the share of Lupine Limited comes to the price of 700, then your order will be executed. Suppose you got 200 shares when your order was executed, but after that the share price increases by Rs 700 per share, then your order will stop.
This type of tool is needed by those people who do a lot of trading and do not have time to pay attention to each order.
Buy Today, Sell Tomorrow :
The full form of btst is Buy Today, Sell Tomorrow. Which means buy today and sell tomorrow. As we know that in intraday trading we have to buy and sell shares on the same day. But through btst you get another day’s chance. Suppose you have bought the share of xyz company but you could not make profit from it in intraday trading, then you get another day’s chance.
Let us understand how this process works? In normal delivery trading it takes T +2 days to process the transaction where ‘T’ means trading day. The share buyer will get the shares deposited in his demat account after 2 days and the share seller will get the payment after 2 days. If someone buys shares on Monday, then the shares will be credited to his demat account on Wednesday.
But if it happens that within these 2 days you get a chance to book profit or loss. This is not possible in normal delivery trading, but it can happen if you use btst.
Advantages of BTST
- There is no debit transaction charge in BTST trade as the shares are not credited to your demat account.
- If you are not able to make profit from intraday trading, then through BTST trade you get an opportunity of 2 more days.
- Through BTST trade, you can earn profit from stocks which have high volatility in a short period of time.
Disadvantages of BTST
- Where on the one hand you get a good margin in intraday trading. On the other hand, you do not get margin in BTST trade as it is delivery trading so you have to pay full price of the share.
- BTST trade carries the risk of short delivery. Let us understand short delivery with an example. Suppose you bought 100 shares of xyz company and sold it on the same day. You will get the delivery of the purchased shares after 2 days and you have to give delivery after 2 days. In this way, if for some reason you did not get the delivery, then you may have to pay a fine due to short delivery.
However, if you do not get the delivery of the shares, then the person who sold the shares to you will also have to pay a penalty.
In the stock market, there is a provision of circuit in the stock market so that the price of any share does not become too high or low in a single day. There are 2 types of circuit, a lower circuit and an upper circuit. There is a lower circuit to prevent the market from going down and an upper circuit to prevent it from going up. The arrangement of the circuit has been done to protect the stock market from any major shock.
Lower circuit has been arranged in the stock market so that the stock of a company does not go down too much in a single day due to any reason. Suppose there is a company about which some negative news comes, due to which the shares of that company will start falling suddenly. The circuit has been arranged so that the stock of any company does not go down completely in a single day. As soon as the price of that share reaches the lower circuit limit, trading in that company’s stock will stop. Lower circuit limits are 10, 15 and 20 percent.
Let us understand this with an example, suppose xyz is a company about which some positive news comes, due to which the interest of people increases in that stock. And because of which the price of that share starts increasing very fast. If there is no limit on this, then that company will start touching the sky in a single day. To avoid this situation, there is a provision of upper circuit in the stock market. As soon as the share price of that company reaches that certain price limit, it will get upper circuit and its trading will stop. The upper circuit limit is 10, 15 and 20 percent as in the lower circuit.
First let us understand what is ROE?
ROE means Return on Equity which in simple language means how much return a company is giving on the money of investors and company owners.
What Is Roce :
Now let’s talk about what is roce, from ROE we get to know that how much return a company is giving on the money of its investors and owners of the company, but the company also takes loan of some money and also has to pay interest on that loan. The profit earned after paying the loan interest is called Roce (Return on capital employed) which simply means how much return the company is giving on the money it is using.
As an investor, it is very important to see the ROCE of the company in which you are investing. If a company is making profit but it has to pay interest on the loan as much or more than it is making, then investing in such a company is not going to benefit you.
Ce and pe are terms used in option trading. Where ce means call option and pe means put option. When you trade in options and you think that the market is going to go up further, you will buy a call option there. But if you think the market is going to go down from here, then you will trade in put option.
When you think about investing in a company, you do research about it, then pat also has to be understood, pat means profit after tax, it is also called net profit in common language. By looking at the pat, we get to know how much profit a company is making after paying taxes.
As we have talked earlier that when you trade in intraday, you can buy shares worth many times the amount of money you have. But while doing this kind of trading, you have to set in advance that you get margin according to the amount of loss you are ready to take. You get 2 options to trade by taking advantage of margin in intraday.
Bo and co
BO stands for Bracket order, which is used to set 3 orders simultaneously in intraday trading.
- buying rate
- stoploss price
- target price
In this way, while doing intraday trading, you set all the things together like how much you have to buy shares, how much to sell and how much to put stoploss.
Co has 2 order sets at once
- buying price
- stop loss
In Co, you do not set the target, you can sell whenever you want, if you do not square off your position yourself, then your position will be squared off automatically at the time of market close.
Amo means AFTER MARKET ORDER iifl securities is a stock broker company that gives such facility to its clients that if the market is closed and you forget to place an important order, then you can place the order even after the market is closed.
You get 2 types of options for trading in the stock market.
1st- You buy a stock first and then sell it later.
2nd – You sell a stock first and then buy it.
The second method is to sell shares first and then buy shares, it is also called shorting. There is no problem in the first method because you buy first and sell later, but there is a problem in the second method. Think you sold the shares of a company but you don’t have the shares of that company, then what will happen? In such a situation, at whatever price you are getting that share in the market now, you will have to buy it at the same price, whether you are incurring loss or profit. This process is called Short Covering.
Let us understand this with an example.
Kishan shortened the share of rcom to 1000 shares at the rate of Rs 3 per share, but later when the time of delivery came, Kishan did not have the shares. And now the price of rcom share has become 3.50 per share, so now Kishan will have to buy through Short Covering at Rs 3.50 per share.
Asm means Additional Surveillance Measure which is imposed by the Securities and Exchange Board of India (SEBI) and Exchanges on those companies in which suddenly some such activity starts happening due to which there is a possibility of something going wrong.
These are some of the reasons due to which a company can be put in the asm list.
- High Low Variation (Share price can go up and down)
- Client Concentration (Some people suddenly start investing more in that company. )
- Close to Close Price Variation (The closing point of one day is very different from the closing point of the next day.)
- Market Capitalization(Asm list is also prepared according to whether it is more or less )
- Volume Variation(Suddenly the volume variation becomes too high )
- Delivery Percentage(People are trading only or keeping for long term )
- No. of Unique PANs (If more people are trading then it is not a problem but if few people are trading more then it is a problem. )
- PE(pe the ratio is too low or too high )
Mtm means Mark to Market. It simply means that what is the current position of any stock or option or whatever you have traded at this time.
Let us understand this with an example, suppose you bought 10 shares of xyz company at the rate of Rs 100 per share. Presently the market price of xyz share is Rs 105 per share. Accordingly, your mtm at this time will be Rs 50. That is, there is a difference of Rs 50 in total. mtm tells you the difference whether it is positive or negative.
105 – 100 =5 profit per share
5 *10 =50 Total profit (difference)
Ex Bonus Date is the date on which it is mandatory for all the shareholders to have shares of that company in the demat account, in proportion to which the company is going to issue bonus shares.
MIS stands for “Market Intraday Square Off” i.e. all the shares you have bought or sold in intraday, their positions will have to be squared off before the market closes. Like bo and co, this also has a similar feature to trade in intraday.
GMP stands for Gray Market Premium. First of all let us understand what is gray market. By the way, there are two ways to trade in any stock in a legal way, a primary market and a secondary market, both are traded through the stock exchange.
The shares issued in the IPO come under the primary market. And after listing, trades take place in the secondary market on the stock exchange. But the trading which takes place before the primary market and even before the secondary market is called gray market. Here gray means that this method of trade is not official trading. Where both primary market and secondary market are regulated by SEBI whereas nothing like this happens in gray market. It also does not mean that this is an illegal method, just that it is not regulated by any organization.
If a company is going to issue in IPO. A person has booked the shares of this company at the rate of 100 per share. Now there is another person who feels that the shares of this company are going to perform well after getting listed, then he talks to the first person to buy that share. The first person says that I will give this share for Rs 110. What is costing Rs 10 more here is the same Grey Market Premium.
Means Futures and Options. In this, derivative products (derivative products) are traded, which have been made, for example, from crude oil to diesel and petrol. This is a derivative product, another example is curd from milk.
Block Deal is called a deal in which 500,000 shares or shares of a company listed on the exchange worth more than Rs 5 crore are dealt. Block deal is done only on special trading window in the opening trading hours such deal is not done on normal window. Block Deals happen between 9.15 am and 9.50 pm.
The full form of IPO is Initial Public Offering. This is the stage when a company is listed on the stock exchange for the first time, it is called Ipo. When a company needs more money to grow, that company wants to raise money by selling its shares. That is why a company is listed on the stock exchange. At this time, the person who buys shares gets the shares at a very low price, many times people make good profits from such shares.
The tt segment means trade-to-trade (T2T) is a segment where you must take delivery of the shares you trade in and make the full payment. You cannot trade in intraday stocks falling in T2T segment. SEBI and the stock exchanges together decide which shares to enter or withdraw in the T2T segment.
The full form of PoA is Power of Attorney, it is a kind of document. Whenever you sell a share, your broker gets the right to debit a part from your account.
Simply put, a Power of Attorney is a legal document that gives the broker certain rights to operate your demat account.