Stock market investments grow your money at a faster rate. Usually, they offer a higher rate of return than conventional fixed-income instruments for the same principal amount and investment tenure. Even though, stock market investments are subject to market vagaries and consequently higher risks, holding them for a long duration evens out the risk component. Besides, you can make short-term profits through advanced trading strategies like intraday and margin trading. Derivative trading enables you to hedge stock market risks.
Whether you pursue a “buy and hold”, active, or risk-hedging trading strategy, nowadays, all can be done online from the comfort of your home. However, if you are planning to get into online trading, you should be cognizant of a few things. We have listed the same in consecutive paragraphs.
Things to know before getting into online trading
1. Choosing an online broker
To start online trading in Kenya, you must first find an online broker. Online brokers are of two types – discount and full-service brokers. The former provides only regular trading and Demat account services while the latter provides research & advisory services as well. Thus, if you are a newbie who requires additional help with stock selection, portfolio optimization, risk management, investment consultation, and stock trading, then you may go for a full-service broker. Else, a discount broker may suffice.
One of the prime factors that you may check while selecting a stockbroker is the Demat Account Maintenance Charges (AMC). You may also explore the pricing plans offered by the prospective broker. If you are interested in margin trading, you may check the MTF (Margin Trade Financing) rates as well. Cost-efficient subscription plans reduce your brokerage and overall transaction costs significantly.
Most brokers follow a flat fee or a volume-based pricing model. If your trading volumes are high, a flat fee pricing plan is more cost-effective. Some brokers also offer subscription plans exclusively for amateur and seasoned investors. You may choose a plan as per your trading experience.
3. Apply for Trading and Demat accounts
As per SEBI mandate, you must open trading and Demat accounts for online trading in India. Opening trading and Demat accounts is a fairly simple and trouble-free process. Some brokers allow you to open trading and Demat accounts at zero charges.
All you need to do is visit the website of the chosen broker and fill out the trading and Demat account opening forms. Then, you must upload soft copies of bank details, identity proof, address proof, and your passport-sized photograph. Later, you need to select a suitable subscription plan and complete the in-person verification process. Finally, you need to affix an e-signature through an OTP sent to your Aadhar-registered mobile number. Once the form is submitted, your broker will send your unique Demat account ID shortly.
3. Login to your Demat account
As soon as you receive your login credentials, you may log in to your account with the given ID and passcode. You may download the mobile app as well and input the login details. If you intend to execute a trade, you may transfer the requisite amount from your bank account into the trading account before proceeding ahead. You may also explore the online trading platform, built-in technical analysis tools, and set up a custom watchlist to track your favorite stocks.
4. Execute the online trade
You may follow live market updates, real-time price alerts, price patterns, and market momentum and finally execute a buy/sell trade order. Accordingly, your Demat account will be credited/debited with the traded stocks.
Getting into online trading in India is a straightforward process. However, maximizing profits from the same comes with discipline, focus, and practice. Once you gain mastery over basic stock trading, you may start pursuing complex online trading strategies like day trades, margin trades, and derivative trades as well. Competitive Demat account charges and pricing plans lower your trading costs considerably. So, you may select a broker based on overall transaction costs and your trading experience.