Stock Market, Stock Trading Tips

Advantages and disadvantages of online trading

investmentzz — Mon, 08 Mar 2010 10:24:18 +0000

Online trading means trading of stocks through internet. In simple words online trading has brought the stock exchange literally to our homes. There are dedicated sites that offer online trading platform to indulge in trading of stocks. Since the introduction of online trading there has been a surge of investors, primarily new investors who were earlier shying away from the market. Online trading has made it possible to trade in different kinds of securities like stocks, bonds, futures, options, ETFs, forex currencies and mutual funds. There are some obvious differences between online and traditional trading. In traditional trading the activities are carried out through a broker, he helps the trader with suggestions on how to proceed in the trade. The transaction is carried out through archaic communication tools like telephone. The broker assists the trader in the whole process in the form of collecting and providing information for making better trading decisions. In return of this service the trader charges a commission on every trade, which is most of the time on the higher side. The traditional form of trading is a time consuming process and generally benefits long time investors who don’t do much trading.

On the contrary there is a change in the process when it comes to online trading. Stock brokers have their websites through which they provide a platform to indulge in online trading of stocks. The platforms are very useful because they provide additional information like market data, news, charts and alerts. Market data is provided in the form of levels namely 1.5, 2 and 3. Day traders are the kind of traders who require every level of market data. Trading decisions are taken by the trader himself. Traders are allowed to trade more than one product, one market and/or one ECN with his single account and software. It is important to note that all trades in online trading are executed in (near) real-time. Online brokers in return of their service charge trading commissions and fees for the usage of the software.

Advantages

Fully automated trading process with access to advanced trading tools.
Online trading of stock allows trading in real-time market data and multiple markets and products.
Possible to indulge in faster trade execution that facilitates day traders in swing trading.
It is easy to open and manage an account and does not have any geographical limitations.
Online trading favors active traders, who trade in bulk but demands lesser commission.

Disadvantages

Online trading is risky if trading is done extensively on margin
There are chances of trading loss in case of mechanical/platforms failure
Online traders fall sort of constant support and suggestion
The fee of online brokers vary

Having said everything, online trading has been a big boost for the stock market.

How does the economy of a country influences the risk associated with investment in a stock market?

investmentzz — Mon, 08 Mar 2010 10:21:44 +0000

We are often told that investments are subject to risk. What is this risk? It means earning less than what you expected from a given investment or losing part of what you invested. When it comes to investments we only talk about returns. There is one common tagline related to investments higher the risk higher is the investment.
Investors solicit advice in brevity, but a broker can never suggest financial securities or stocks that would promise return without an element of risk. A good broker will always suggest stocks that involve calculated risks. If the fear of losing makes you leave the money idle or put in low-return instruments, then inflation will devalue it. Hence, investment is must, and the risks associated with it must to be understood.
In an ideal scenario, the investor should need to take only risks relating to the economy and company performance.
There are several parameters that evaluate the risk factor. Statistical and analytical tools can be used, but they are not affordable for the small investor nor would he always have the time or knowledge to use them.
Risk is related to time. The first question to ask when making an investment is: When do I need the money? In general, you can take more risk if your investment horizon is distant. This is because you have more time to recoup your potential losses along the way. Major factors that determine risk are stated below.
The economic performance of the nation fuels the risk factor. The GDP growth of 8% + in the last few years has fuelled the India stock market rally. Interest rate movements are also an important deciding factor, each time the Reserve Bank changes the benchmark rates of interest, it has a positive or negative impact on the stock market. The dominance of FIIs in India also makes the stock market sensitive to interest rate cuts, which are announced by FED in the US. International developments, such as energy prices, WTO, insurgence and wars between countries also impact the risk factor. Regulatory changes such as Truck overloading norms, Intellectual Property Rights, and VAT also affects the risk factor. The feel-good factor is also necessary to keep the market sentiment buoyant; if everyone feels that the economy is doomed then there is little one can do to improve the market sentiments.
Industry-level risks include: the state of a specific industry, whether it is considered to be growing or declining. Industries such as IP telephones and cell phones are characterised as a growing sector, whereas an industry that has harmful effects on the environment is considered to be declining.
Industry cycles are also important: for example, in the monsoons, there is less demand for cement compared to the rest of the year. Structural changes and paradigm shifts in an industry should be observed, such as people’s current preference for motorcycles compared to scooters, or landline phones versus mobile phones or electronic encyclopedias versus printed books.

Demat account is the stepping stone to stock trading in India

investmentzz — Mon, 08 Mar 2010 10:02:02 +0000

Demat stands for dematerialized account and it is imperative to have a demat account in order to trade in the stock market in India. A depository participant is the right entity who is authorized to open a demat account, most of the stock brokerage company act as a depository participant and facilitate in opening of a demat account. Demat is just one service that comes under depository participant (DP), another important service is remat (just the inverse of demat-converting electronic securities into a physical form). Transfer of securities/change of beneficial ownership and settlement of trades done on exchange connected to the Depository are some more services offered under the depository participant domain. While opening a demat account apart from the mandatory formalities the investor has to sign an agreement with DP in a depository prescribed standard format that specifies the rights and duties of both the parties. The demat account number is conferred a BO ID (Beneficiary Owner Identification Number).

Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL) a highly esteemed brand in the Indian stock market offers online stock trading facilities by the URL-investmentz. The online trading site also plays the role of a depository participant and facilitates in EASI forms, demat/remat and DIS requests, modification and closure forms. There are many plus points of subscribing to investmentz’s depository participant services.

In stock trading it is the most safest and convenient way of holding securities. It also brings down the cost on transactions, investmentz in this regard cites a very good example, the charges of transactions through bank tellers is always costlier than ATM transactions, similarly dematerialised securities are cheaper than physical securities. Investmentz’s depository participant services allow shifting of securities at just one click.

Dematerialised securities is a highly time saving process compared to physical securities in stock trading as it avoids paper work, stamp duty charges and transaction cost. As mentioned before, the whole process is less risky it prevents, thefts, forgery, delay in transfer and delivery failures. The depository participant services of investmentz also make it possible to trade odd-lot shares, making it possible to trade even single shares.

The additional facilities of depository participant are as follows

It offers nomination facility.
Any kind of change in bank account details will electronically intimidate all companies in which investors hold any securities.
Depository participant themselves transfer the securities without involving the investors in any kind of correspondence with the companies.
Shares that come from bonus, split, consolidation, merger etc. are automatically gets credited into investor’s demat account.

Public issues shares are directly credited into demat account of the applicants in quick time.

What makes an online trading site reliable?

investmentzz — Mon, 08 Mar 2010 09:46:46 +0000

Online trading is fast catching up with every investment and financial professional in India, a recent study indicates that online share trading in India has jumped from just 3 per cent of the total turnover in 2003-04 to 16 per cent in 2006-07. It does not require a rocket scientist to understand why online trading is becoming so popular? Online trading sites have literally brought the stock exchange to our homes. But if investment and trading has become so easy then why is the statistics of online traders not very bullish? Are you wary about trusting the online trading site?

What should be the checklist before selecting an online trading site?

For how long would the site be active and provide me constant updates? Mandatory during the working hours of NSE and BSE and preferably 24X7 updates.
The status of the value of investments should be easily accessible.
The status should be presented in a crisp and precise manner.
What kinds of trade types have been offered? For example ‘Limit’ trades that allows investors automatic buying and selling with the rise and fall of the securities
How exhaustive and credible are their research on investments and banking

Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL) popularly known as investmentz in the online trading sector offers excellent online trading opportunities through its sites. The online trading platform of investmentz is highly credible. Investmentz offers extensive information on markets and companies through hourly market reviews, periodic market commentary and recommendations. Investors can substantiate their decision on the basis of these researches. Investmentz is of the firm belief that there is an inherent trust factor that makes investors join them and credible suggestions retain them.

Investmentz offers advisory services as a value-added service to all retail and institutional clients. Updates are provided on hourly, daily, weekly, fortnightly and monthly basis through SMS and e-mails. Retails clients can take constant updates of their accounts and also be aware about resultant obligations through various reports like Bill, Contract, Financial Ledger, Transaction Register, Stock Register, Portfolio Tracker, Stock holding position, etc.

Investmentz has the following memberships, which gives them more credibility

• Foreign Exchange: Accredited by FEDAI

• Debt: NSE

• Derivatives: BSE, NSE

• Cash Market: BSE, NSE

• PMS under SEBI License

• Merchant Banking: Approved by SEBI under Category I

• Depository: CDSL

• Commodities: NCDEX MCX, DGCX, EAST INDIA COTTON