Most of us know that a stock market is a place where fortunes can be made and we are always fascinated by it. We know friends and relatives who did well in the stocks market and we are influenced by them. No doubt that we want to enter the market and build fortunes for ourselves. But as a beginner, we lack some ideas and this blog would help you understand some of the basics.
What do we need to start in stock markets?
- Trading Account
- Demat Account
- Bank Account
- KYC Documents
- Proof of Income if you want to trade in Futures and Options
Trading Account is required to execute buy and sell orders on a stock exchange. The stock exchange is like a market where you try to bargain the best deal for yourself. Let’s create a situation to understand the same.
Suppose, at the stock exchange, you express willingness to buy 100 shares of ITC and in return, you would agree to pay 220₹ per share. for the deal to close, you have to pay 22000₹ in total and you will get 100 shares of ITC in return. In order to find a seller who would give you 100 share of ITC for 220₹ per share, you will log in to your trading account and place an order on the stock exchange to buy 100 shares of ITC for 220₹ each. Trading account provides us the platform access the stock exchange.
Demat account also known as dematerialization account is required to hold the shares on your behalf. Demat account stores the shares and the record in electronic form. The way bank keeps out savings, demat account keeps our shares. When we sell a share that we have bought and held for two days, the share will be sold from Demat account.
Bank Account is required to withdraw cash from trading account and to deposit cash in trading account. While linking a bank account to trading account, its always better to add a bank account which is internet banking/ Online payment enabled.
KYC Documents are required to keep a record of the person registering for Demat account. This serves a few purposes, the most important is to prevent money laundering. PAN card is mandatory while aadhar card can be submitted as proof of identity.
Proof of income is required if you want to trade in Futures and options. Futures and options are high risk/return instruments and anyone with limited capital should not enter into it. This is the reason why stock exchange guides brokers to make sure that the person trading in Futures and options has a steady income.
What Next?
Once you make sure you have these documents as stated above, you have to find a broker with whom you would like to open trading account. You can open demat account with the same broker. You can chose a broker as per you requirements but for a beginner, zerodha serves the purpose quite well. If in doubt, you can always compare two brokers on chittorgarh. Once you have decided the broker, head to their terminal and get started with the process. Those who would like to start with zerodha, can enter their phone number in the form and verify with OTP and check the page here for step by step guidance.
Once the accounts are approved, you can start trading after depositing some amount in trading account.