Trading System in Stock Exchanges

TRADING SYSTEM IN STOCK EXCHANGES

¸ Finding a broker

¸ Opening an account with broker

¸ Placing the order

¸ Making the contact

¸ Preparing contact note

¸ Settlement of transaction

1. Finding a broker

The shares are brought through a stock broker who is a licensed member of a recognised stock exchange.

Services

1.     Provide in formations: capital structures, earnings, dividend policies and prospects

2.     Supply investment Literature: Education to investors, providing financial periodicals, prospectus and reports of companies

3.     Availability of competent Representatives:

appointing sufficient incharges

2. Opening an account with the broker:

The broker opens an account in the name of the protectiveness client only if the broker is satisfied about the creditworthiness of the investors and his intention to trade in the market.

3. Placing the orders

a. Market orders- urgent desire

b. Limit orders: Maximum or minimum price at which the investors is willing to buy or sell shares

c. Stop loss orders: conditional market order

to stop loss

d. Cancel order: Execute immediately

e. Discretionary order: Execution for the best

f. Open order: No time or limit for the execution

g. Fixed price order: client specifies the price at which the shares are to be purchased

h. Other orders

¸   Day orders: Unless registration

¸ Good Till cancelled(GTC) Order: Order remains open until executed or cancelled.

¸   Not held order: Gives discretion to the floor brokers

¸ Participate but do not Initiate (PNI): The floor brokers is instructed to participate in trading but not to become aggressive

All or None Order (AON): The order wants to be executed by customer

Fill or kill order(FOK): Complete execution

Immediate or cancel(IOC): Part of the order which is not executed will be cancelled

3. Making the contract : Announcement by slip in a box

4. Preparing Contact note: Parties will record all details in contract

5. Settlement of Transaction: Settlement by the payment of buyers

Contracts:

1. Ready Delivery contracts: Immediate delivery of contacts and cash payment

2.   Forward Delivery contacts: carrying over the transactions to the next settlement day

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Settlements:

1. Fixed settlement:

It starts on a particular day and ends after five days

2. Rolling settlement:

fifth working day settlement

Trading on margin

It refers to the use of borrowed funds to supplement the investor's own money. Investors will do Partial money settlement by own and part from broker

Advantages

¸  It provides more profit with less investment

¸ Increases buying power

¸ Suitable for experienced traders

Short selling:

It  s the practice of selling borrowed securities.

Advantages

¸ Profit and price decline

¸ It became as highly conservative investment strategy