On todays article, Ill be explaining about indian stock market

operations. Here Ill be directly jumping into the key terms & factors
we use while trading the market hence do not expect any form of
detailed fundamental & theoretical information about stock market
operations on this article as this article is for start up people in
market & for newbies. You need to start with the very basics first &
gradually you keep on learning the deeper insights of market.Ill be
explaining you the practical terms what we use in daily basis for
trading in stock market which you need to know to kick-start your
stock market trading journey.Ive created this article based on the
most asked questions from newbies to me regarding stock market
start-up process & once you know below key points, youre ready
enough to start your trading career hereon. Instead of making the
knowledge process complicated, I tried to keep it simple with
below key points:

1) What is a stock market & most important terms related to it

2) What is trading Vs. investment & the difference

3) How to open an account in stock market to start trading

4) What is the cost of share trading

5) With how much capital, we can start share trading

6) Trading platform to do buy/sell

7) EQUITY FUTURE OPTION > only three ways to buy/sell

shares

Now here is a twist , I want every beginner to start from point 7 to

point 1 !!!! and also we'll mix all the topics in between so that it
becomes an entertaining reading session otherwise you'll feel like
reading a boring book ! yes, I am doing this using my past training
experience. This way beginners catch it well as far as Ive seen &
most importantly it does not go boring at all . Stay with me !!!!!!!

So, since we are in stock market now , we all know well be dealing
with shares or stocks of different companies only to make our
profits. Lets have a look how the stocks or share price really look
like on the trading software:

Now, Lets talk about where to see the share prices going up or
down first . We call it trading software what you just saw in above
video.

A trading software is a software where we can see share price

momentum & do trades like buying & selling of shares.

This software is provided by BROKER. Yes A BROKER

Now Ill cover a topic regarding BROKERS ROLE IN

STOCK MARKET
Firstly, We all need a broker to start trading in indian stock market.
As the name states, A broker is nothing but an intermediary
between we(traders or retailer) & exchange. A broker does all the
processing required for our share trading. There are lot of brokers
youll find around once you search it in google.

Firstly find any broker & ask him to open accounts for you.Broker
opens up necessary account for you required for share
trading.There are two accounts required for share trading purpose :

1) Demat account & 2) Trading account

Lets talk about trading account first here.

Trading account is an account where youll be trading or buy/sell

shares.Once your trading account is opened, you receive your
personal id & password to access that account. Youll have to
deposit funds you want to invest or trade in that account, then you
can login to that trading software & can see share prices movement
like how you saw in above video. Ive shown you a trading software
given by a broker namedwww.sharekhan.com . As I said , there are
many other brokers available in market,so you can open an account
with anyone of them & can get a trading software.This software
could be different in looks but the functions are almost same. Lets
have another look at the same trading software where Ill show you
how I am logging in & Ill explain you some common features youll
find in any trading software like this one.

Now lets talk about demat account :

Lets know full-form of DEMAT A/C first , its called dematerialization
account. Its an account where your bought shares will be deposited
in electronic format like how your money is kept in your savings
account as electronic format after deposit. There is a term called
DP(depository participant) who has a right to open up demat
accounts & most of the brokers have got this DP license to open up
a demat account for you.So while you approach a broker, ask him
whether he is a DP or not & if he is a DP,it means he has the right
to open a demat & trading a/c for you.So every broker can open a
trading account for you,but to open demat account for you,he needs
to be a DP himself so ask him whether he is a DP or not as your
both the accounts should stay with the same broker for your
comfort.

SO the key point is : Your trading account is opened to buy/sell

shares after you deposit money in it. Once you buy shares in
trading a/c, those shares will be transferred from your trading
account to your opened DEMAT account. Now whenever you want to
sell off those shares, you will have to sell it in your trading account
& profits or losses after selling off your shares will be deposited
back into your trading account.Now if you wish, you can have a
withdrawal of your money from trading account.For fund
withdrawal,place a request to your broker. Once broker process
your withdrawal request , youll receive back your money in your
bank account.Remember, there is no cash transaction in stock
market.When you deposit money in your trading account, youll
have to transfer funds or deposit a cheque or demand draft in your
trading account.

Along-with providing you online trading platform, broker also

provides you offline trading facility.In offline trading facility, youll
have to call up the broker & instruct him what shares you want to
buy/sell instead of doing it on your own using the online trading
software or platform.So its your wish which service you choose.
Some broker provides both the facilities & some provides any one of
them between online trading & offline trading.

What are the documents required to open an

account ? here are the list of documents required:
(1) PAN CARD (2) 6 months bank statement (3) passport size photo
(4) Address proof

Lets understand what is the brokers advantage in providing

all these services to us or its clients:

He earns commission from us for the service he provides.

What is the structure of the commissions he makes then ? Well

discuss briefly about this topic later but for now,lets have a basic
idea on this :

Suppose,

You want to invest Rs 60,000/ in stock market. Hence you deposited

Rs 60,000/ in your trading account so that you can buy shares. You
analyze the market & see TATAMOTORS will be a good bet for
making money.Lets assume, Stock value of TATAMOTORS is Rs 500
per share & you decided to buy 100 qty of shares.

So, you bought 100 shares of TATAMOTORS at the rate of Rs 500

per share.

Your total investment becomes Rs 50,000/

Then is Rs 10,000/ left in your account ?????????????? NO. You

did not count the cost of your done trade.There are some costs
youll have to bear when you purchase shares as well as sell-off
your holdings or shares & this cost structure is called
TRANSACTION COST. As the name suggests, while doing a
transaction in shares,these are the types of cost youll have to bear
whether you make profits or loss. Below are the types of costs :
Trading or investment cost = Brokerage + STT + Stamp duty +
service tax + other charges

Lets go one by one :

Brokerage : This is charged by the broker as his commissions.

Considering above examples , When you had a transaction of Rs
50,000/ , broker charges you a commission of 0.3% on the
transaction amount which is Rs 150/. Lets assume, after a week the
stock shot up around rs 550/ per share & you thought about taking
the profits of Rs 50/ per share.So you sell off your 100 shares that
you bought for rs 500/ per share.Now while selling off, youll again
have a transaction of Rs 55,000/ & the broker will again charge you
a commission of 0.3% on that which is Rs 165/.So in this entire
trade, you made a total profit of Rs 5000/ by buying & selling
shares & your cost of broker commission is Rs 315/( rs 150 while
buying & rs 165 while selling ).So net profit gained after brokerage
is Rs 4685/ ( rs 5000 of total profit rs 315 brokerage cost). Dont
be happy as I did not deduct other charges yet!!!!!! Pls note :
Different brokers charge different amount of commissions.
According to me, 0.2% is a standard commission pattern & you
should not open an account with a broker who charges you more
than 0.2%.

There are some more topics to discuss in terms of brokerage

structure later once we finish up next few topics.

Now , lets talk about other charges like STT , stamp duty , service
tax , sebi turnover tax etc. All these charges are from indian govt
hence you cannot do anything about it.Below i've attached a few
screenshots of these charges from NSE INDIA's official website.Just
have a look at these charges & don't get confused if you're not able
to understand the terms & calculations as these charges will be
easily understood once you strat real-time trading with a broker and
also it's your broker's responsibilty to make you understand all
these different charges.Below are the screenshots :
Overall , you can assume around 0.2% will be charged on your
transaction combining all different charges by govt. Below is an
account statement screenshot Ive shared to show you how different
charges are applied on our trading transactions:

Well be knowing more details regarding cost of trading where

well know about different set of brokerage charged based on
different category of trading & details of govt charges based on
different category of trading transactions. As a beginner, I dont
want to put everything altogether on you hence going step by step.
Once I clear the basic ideas of all the key topics , Ill jump into
detailing of each topics discussed here.

Lets talk about a few important terms of this

market now :
What is stock market : The trading software screen youve seen is
the real stock market basically where prices of different companys
share is moving up & down.Why is it moving up & down ? because
some people are buying the shares & some people are selling it at
the same time.When more people are buying, price moves up &
more people are selling ,price goes down.So we can say, due to
demand increases of a stock, price goes up & due to demand
decreases of a stock, price goes down-simple.Stock market is a
market where different company's shares are traded by
people,hence the place is called stock market & thanks to internet
due to which we can access this market online from anywhere we
live.
What is BSE & NSE / Exchange :

An exchange is a marketplace where buyers meet the sellers or

sellers meet the buyers & do their transactions.You can say
exchange is the organizer here who creates this market place called
"stock market".All the companies shares are listed on the exchange
only.When someone wants to do share trading & open the account
with broker, he gets registered with the exchange automatically as
the account opening procedure is processed by the exchange only.
There can be multiple exchange in a country.In india, BSE & NSE
are the most popular stock exchange we have. Mostly people trade
in NSE due to some advance facilities it offers which well discuss
later on.

What is SEBI :

Full form of SEBI is securities exchange board of india. SEBI

comes under finance ministry of india.SEBI is the watchdog of
indian financial market & it monitors the
exchanges,retailers,companies same like, we have lot of different
banks in our country working independently but the regulatory body
is RBI only.

What is bullish/bull & bearish/bear :

These two terms are widely used in all different markets in

the world. People keep on saying I am bullish in abc stock
or I am bearish in xyz stock. What does it mean ? When
someone says, he is bullish it means he thinks that stock will
move up & good for investment.When someone says, he is
bearish it means he thinks the stock will go down & bad for
investment.So keep this two terms in your mind as well be
using these two terms the same way in future.

Timings of stock market : Monday to Friday from 9.15 am to

3.30pm.

What is positional & intraday trades :

When you buy some stocks today & sell it tomorrow or later
on is called- you have done a positional trade. As the name
suggests, when you buy shares & when you do not sell it on
the same day & hold it at least for 1 day, it becomes a
positional trade. So when you buy some shares today & sell
it off today itself, well be calling it intraday trade as you did
not hold it for tomorrow.Pls note this two points for further
reference.

Long & Short :

In stock market , there is a facility to trade a stock in both

the way upward & downward.This topic will be a bit
complicated to understand so focus on it.

Lets take an example : TATAMOTORS share value is rs. 500/ per

share.

Now there are two friends, one is saying the stock price will move
up to 550 & more in a week & other friend is saying, it will fall to
450 & more down in a week.As the views are exactly opposite, they
thought about playing a bet on their thoughts.

So notice here, friend A is betting the stock upward, means when

the stock rises up, he will make money but friend B is betting
downward, means when the stock will fall down, then only he will
make money & will win the bet.

Now , if price rises to 600 from 500, friend B will pay Rs 100/ per
unit he bet to friend A

and otherway, if price falls from 500 to 450, friend A will pay Rs 50/
per unit to friend B.

So the same way, in market you get a chance to make money in

both sides by placing your bet.

In the example , friend A is LONG in the stock & friend B is

SHORT in the stock. Hope you got my point, when you bet
upside in a stock, you will be called bullish in the stock as
well as LONG in the stock and when you bet downside in a
stock, you will be called bearish in the stock as well as
short in the stock.

SO , pls clear two points from here :

1) we can trade a stock either upward or downward & make

money trading both the way.

2) When we trade a stock to move up we're long or bullish

on that stock

When we trade a stock to move down we're short or

bearish on that stock.

We'll talk more about this topic later once we gain some more basic
ideas of market terms.

Well discuss some more key topics later on & for now lets get back
to real time trading area of money making process to know how the
money is made :

There are three different ways we can trade

& make money in stock market :

1) EQUITY 2) FUTURE 3) OPTION

We need to know each of these topics so that we can take
advantage of different ways of making money in market. Well
discuss EQUITY & FUTURE segment first :

To understand better, well take an example.Lets assume,you have

rs 50,000/ for investment & Ill offer you two different ways of
investment from where youll have to choose one.

Lets assume, TATAMOTORS share price is rs 500/ per share

Investment option 1 : Buy 100 shares of tatamotors for Rs

500/ per share & your capital of Rs 50,000/ will be invested
in it.As you bought the shares with full payment, now you
become a shareholder & you can sell-off the shares
whenever you want, means there is no timeline.All your
shares will be deposited securely in your demat account once
you buy it.

Investment option 2 : For investment option 2 , I need to ask you

a question.If you answer the question with YES, then only we can
go ahead with investment option 2.Now the question is, do you
have a timeline set in your mind to sell-off the shares within a
months period means, after buying now, do you want to sell-off
your holdings with a profit or loss within a particular period(anytime
in a month or any day during a month) instead of holding it for 6
months to 1 year or 10 years. Now who does this form of
investments with a holding period of 1 week or 15 days etc(very
short term)?? There are people who does it.If you are a good
analyst or market trader & your analysis says any particular stock
will move up for 3% in a week,then why not that trader will buy
some shares today & when it grows up for 3% as he thought, he
books the profit immediately in a week's time quite possible. In
this small time trading scenario, where you agree to hold your
shares for a month,then only I am offering you another investment
option here:

Youll have to pay 20% of your total

investment amount instead of paying the full amount of
investment like investment option-1 & you can enjoy the
benefits of investing rs 50,000/(the benefits you would have
received investing in option-1 discussed above). But there is
a deadline for holding the stocks you bought here & that is 1
month. Within a month , you can sell-off your holdings of
shares anytime you want but when the month ends, your
holdings will be sold-off automatically at the market price
irrespective of your profit/loss.

So on this form of investment ,we have certain conditions to follow

what we did not have in investment option-1. Why investment-2 is
more attractive , because you can buy more amount of shares using
investment option-2 as you just need to pay 20% of your total
investment in real & you are getting a credit of rest 80% of your
investments by market.Using investment option-1 , you bought 100
shares with your capital of Rs 50,000/ whereas using investment
option-2, you can buy 500 shares with the same amount( as for
every 100 shares you are buying for Rs 50,000/, youre just paying
20% of it which is Rs 10,000/ for 100 shares as investment capital)

So while you have a capital of Rs 50,000/ , you now have two

options: you want to buy 100 shares investing your whole capital or
you want to buy 500 shares paying a margin of 20% for each 100
shares. Both the investment options has their own advantages &
disadvantages. Investment option-1 has no time limit to hold your
bought shares as you paid full amount of share price whereas
investment option-2 has a timelimit of 1 month to hold your bought
shares as you paid a margin amount to buy those shares & did not
pay full share value amount hence you do not become the owner of
those shares.

Now, lets clear the cloud finally:

Investment option-1 is called EQUITY > when you buy a

stock with a full payment of the stock price , you are buying EQUITY
SHARES of the company stock. so when you buy a companys stock
in EQUITY segment, these are the facilities you receive :

= You become an investor of that company.

= You can hold that stock as long as you wish & sell whenever you
want.

= you can buy number of shares as per your wish like 1,2,3 or
100,120,121,etc

= Youll receive dividends & other facilities from the company when
the company starts performing well.

Investment option-2 is called FUTURE > when you buy a

stock with a margin value like 20% & do not pay full price of stock &
have a particular time limit for holding those shares , you are
buying future stock of the company.So here are the conditions when
you trade in future segment of a company:

= You have a time limit on your holdings. Usually 3 months

limit is allowed means if you want to buy a future stock then
youll be given choice of maximum 3 months holding period
like current month, next month & far month.If you choose
current month then current month will be your maximum
timeframe to hold that stock future.If you choose next
month,then current & next month will be your timeframe to
hold the stock.

= Every months last Thursday is the expiry day of your

holdings it means if you buy stock future with a current month
holding,then current months last Thursday will be your holdings
expiry day or last day.If you do not sell your holding within
that day, your holdings will be automatically sold off when
market closes on that day & profit/loss amount will be
credited in your account.

= You cannot buy shares as per your choice while trading in

FUTURE segment. No. of shares to be traded for different
stocks are allotted by NSE & here is the download link of the list
futurelotsize . For example, if you want to buy Infosys stock in future
segment ,you cannot buy 1 or 10 shares, youll have to buy
minimum 150 number of shares as defined by NSE. Likewise if you
want to buy future of ICICI BANK,then min 700 shares will have to
be bought. So the minimum no shares you will have to
trade,are called 1 lot means when we buy icici bank future
with 700qty shares,well be saying that "we bought 1 lot of
icicibank future".If we say,we bought 2 lots of icicibank future,it
means we bought 1400 no shares In icicibank stock future. So this
is how every stock has their own number of defined shares to be
traded in future segment.

Now, when you buy 700 shares or 1 lot of icicibank fut, how much
you will have to invest in that, lets find out.More or less,in future
segment on an avg you need to pay around 20% of total share
amount value youre investing like : when you buy 700 shares of
icicibank future it means icicibank share price ( 350 ) * 700qty = Rs
2,45,000/ worth of share you bought but youll have to pay approx.
20% of that total value which is Rs 49,000/. So by paying just Rs
49,000/ youre getting the same profit/loss & advantage of paying
rs 2,45,000/. Lets assume,

Person A in equity segment buys 700 shares for Rs 2,45,000/

person B in future segment buys 700 shares for Rs 49,000/

Share price goes upto 800 in 10 days & both of them sell-off their
shares

Person A earns a profit of rs 100/ per share.So in 700 shares his

profit = Rs 7,000/

Person B also earns a profit of rs 100/ per share.So in 700 shares

his profit = Rs 7,000/

Lets calculate the rate of return on capital invested for both

investors:

Person A invested Rs 2,45,000/ & earned Rs 7,000/ on

investment.His Return = 3% on capital

Person B invested Rs 49,000/ & earned Rs 7,000/ on investment.His

Return = 15% on capital

So, the outcome is , person B invested less amount than person A

and also buying the same amount of shares like person A, but he
managed to make much more higher profit than person A & this is
the power of trading future segment using margin facility of 20%
payment.

SO some key points to know when you are trading future

segment:

1) You cannot trade in future segment in all the stocks

available for investment in market.But yes, you can trade all
the stocks in equity segments. youll find only around 200 stocks
are available to trade in future segments & here is that list
futurelotsize

2) When youre trading in future segment, you are not really

investing in company stock as you are not paying the full share
price amount hence we will not call it like "we are buying shares of
a company" but well say "we are buying a future contract". All
future trades are contracts between you & some other trader who is
trading on a stock value for a limited time period for profit or loss
like you only.So future trades are the contract between you & some
other random trader in market who is taking a position opposite to
you in the same stock.Lets not make this concept complicated & in
simple language, whenever you are buying something in market ,at
the same time there is someone who is selling it to you otherwise
how & from where will you buy it when someone else is not selling,
so this is the overall concept goes on in market between buyers &
sellers and so the share price keeps on changing up & down.

So , now on whenever you are buying a future segment of a

stock , youll be saying buying a future contract of XYZ
stock & when you are buying equity segment of a stock
youll be saying, buying shares of xyz stock.

Let me clear one more point here : difference between

"TRADING & INVESTING"
Trading is a term used for short term traders like who buys &
sells shares on the same day for small profits and trade
stocks with holding period of 4 to 5 days.There are also terms
like short term traders or very short term traders which is also
known as swing trading.Very short term traders are them who
trades intraday & swing traders trade a stock with a holding
period from 4-5 days to 1 month. Mostly short term traders
trade future segments in their trading as they have a limited
timeframe to buy & hold their shares hence they can use the
advantage of using 20% margin of their total investment.

INVESTING is a term used by medium & long term investors

in the market.If you're buying a share to hold it for 6 months ,1
year or 10 years timeframe, then you will be called an INVESTOR.
For investing purpose,there is only one way of trading & that is
buying EQUITY shares of a company by paying the full cost of those
shares to become a owner of it.

Lets understand option now :

Understanding option is a bit difficult & here Ill be explaining the
basic understanding of option trading. To understand option trading
in deep, you need to trade option features in real time market
condition for few months & once you spend certain amount
of trading-screentime & gain experience of using basics of
option, then only gaining a deeper level of knowledge in
option trading is possible.So I suggest beginners not to trade
options in your initial days & stick to equity & future segments only,
for first few months and start monitoring option on your screen side
by side.As a starter, your main focus should be on technical analysis
& equity-future segments only.

To make you understand option trading, Ill take an example of a

cricket match as by explaining this way, youll get the concept in a
much better way:

Assume , some friends are watching a cricket match going in

between india & Pakistan .

Now before the match starts, some of them decided to have a

friendly bet on this match & they designed a different way of playing
the bet on that match.They did not bet on win & loss of the match
as all of them were supporting the same team INDIA.So they
decided to play the bet based on score india makes that day.

They have chosen three layer of indias score 150 , 250 , 300. For
every layer of indias score there is a an amount to invest for
betting in that layer like :

For 150 layer of score, youll have to pay Rs 30/ per unit you bet

For 250 layer of score, youll have to pay Rs 10/ per unit you bet
For 300 layer of score, you'll have to pay Rs 5/ per unit you bet

Now, How & when someone makes money ? >Once indias score
crosses the layer + per unit cost the player starts making money
who bet on that layer.

The profit formula is = india's final total score ( layer you bet +
per unit cost you paid). For example, a player wants to play in 150
layer, he will have to pay Rs 30/ for that layer to play.So his
investment from pocket is nothing but Rs 30.Now if India scores
300 finally how much he makes = india's final score ( His bought
layer 150 + his investment per unit Rs 30 )= Rs 120 per unit.so the
player made Rs 120 out of this match.If he would bet 100 units,
total profit would be 100unit*rs 120 per unit which is Rs 12000/
profit.So the players will have to guess how much india will score &
play based on that range. In this same case,lets assume india lost
all its wickets with a score of 100 only,in that case the same player
would have lost his Rs 30/ investment for playing 150 layer of
score.So the great part of this game is, your loss is always limited
to your investment only but profit is unlimited more india
scores,more you will make but in terms of losses, you loose the
amount you invested only in case, india could not make it.Another
situation is ,india scores 160 finally , then how much this same
player will make, its just Rs 10 & he''ll loose his Rs 20 from his
investment as the formula is =india's final total score 160 ( layer
you bet 150 + per unit cost of layer rs 30) = rs 20.So you loose rs
20/ on this investment.If this result becomes -30 when india scores
only 150 which is your layer of bet, you loose all your investment
which is Rs 30/ & below that you do not loose anything as in this
game you cannot loose more than what you played for.So in case
india score 100,then also you loose the amount you bet for rs 30/
only.So this is how, in this game losses are kept limited & profits
are kept unlimited as if india scores 500,then you'll get all the
profits between the difference of india's final score & your bet
level.So hopefully you understood the game by now & if you got all
my points,now you can easily understand option trading strategy
used in indian market. Now why the per unit value is more or
less?The value is decided based on probability like scoring 300 is
much tougher than scoring 150.So layer of 150 will be costly than
300.

Like betting on the cricket match based on score layers above , in

option trading we trade based on different layers of stock prices.For
example, ICICIBANK stock value is 395. In market, youll find
ICICIBANK option trading offers you some layers like
400,420,440,460,480,500. These layers are known as STRIKE
PRICE.so now on, well be using the term as STRIKE PRICE instead
of layers. Like the cricket match, every strike price has a cost per
unit & this cost is known as PREMIUM VALUE.Lets assume the
premium value for the strike prices are like below :

When icicibank Stock price is at 395

strike level 400 will cost rs 30

strike level 420 will cost rs 25

strike level 440 will cost rs 20

strike level 460 will cost rs 15

strike level 480 will cost rs 10

strike level 500 will cost rs 5

Since 400 strike price is close to market price, so it is expensive as

probability of price reaching this level is much more higher than
other strike price levels.

So a trader thinks icicibank will move up to 450 in next few days

within a month,so he can bet on 400 strike price by paying 30 rs
per unit. Lets assume he bet on 100 units, so his investment will be
100units*Rs 30 premium = Rs 3000/ in this trade.Now , finally if
price moved up till 450, he will be able to make a profit of Rs 2,000/
. HOW ?

Same calculation as we did in the cricket match :

= icicibank final stock price after a month is 450 (strike price you
bet-400 + cost per unit or premium cost rs 30)

= Gain of Rs 20/

As you have 100 units,so you made a profit of Rs 2000/. So with an

investment of Rs 3000,you made a profit of Rs 2,000/ not bad
!!!!!!!!!

Hopefully, you understood the concept of option trading by now.

Now a few key points regarding option trading :

1) Similarly like future segment, there are fixed lot sizes youll
be trading in option.

2) Similarly like future segment, there are expiry dates & min 1
month & max 3 months to 1 year holding time limitations too you
have.

In option trading , there are two segments called call option &
put option

As we discussed earlier, we can trade a stock in both the direction

whether it will move up or it will move down. So for icicibank, two
form of strike price youll find in market like below :

Put option Stock current price Call option

Strike 400 @ 35 395 Strike 400@ 30

Strike 380 @ 20 Strike 420@ 20

Strike 360 @ 15 Strike 460@ 15

Strike 340 @ 10 Strike 480@ 10

So the rule is , when you want to bet icicibank on the upside,then

you will choose a strike price from CALL OPTION on the right hand
side. If you want to bet in icicibank falling down , then youll be
choosing a strike price from put option on the left hand side.

As weve already done an example of stock moving up from 400 to

450 level after buying a strike of 400 call option above, lets do an
example of how we make money when we bet that icicibank will fall
down:

Lets assume,Current price of icicibank is 395 & our analysis says , it

will fall upto 300 level from current 395 level.So we can choose any
form of strike price as we have a big range of almost 100 points fall
in our mind.lets say, we have chosen 380 level of strike price & to
bet on that well have to pay the premium cost for it which is Rs
20.Lets assume lot size permitted for icicibank is 100, so our
investment will be 100qty*premium cost of Rs 20 = Rs 2000/.For
example, if icicibank falls down upto 300 as we expected, then how
much profit will come in,

Our profit will start from 360 downwards ( just opposite of what we
did while buying call option in the upside).

icicibank final stock price after a month is 300 ( Strike price we

bet is 380 premium cost rs 20/)= Rs 60 gain/unit

So , well be making a profit of 60 points per unit for 100qty of

shares which is Rs 6000/.

If you wish , you can buy both call & put at the same time.In that
case, market moves either way ( up or down) , you make
money.But remember, if market does not reach your
strike+premium level in case of call & strike-premium level in case
of put , you loose all your investment.For example, in above put
trading example, you will loose your investment of Rs 2000/ in case
price does not reach at least 360 level.
SO, In market, you can make money both the way .What matters is
your viewpoint regarding which way market will move & to get this
view we use technical analysis,then place our trade using
equity,futures or options.

Here is a quick video presentation on option trading below :

Some key points here >>

When you invest or bet in a stock moving upside , you are doing a
LONG in that stock . Remember this term LONG. So while you
want to long a stock , you have three choices now :

1) Long equity shares of that stock

2) Long future contract of that stock

3) Long call option of that stock

Similarly, When you invest or bet in a stock moving downside , you

are doing a SHORT in that stock . Remember this term SHORT. So
while you want to short a stock , you have three choices now :

1) Short equity shares of that stock

2) Short future contract of that stock

3) Long a put option of that stock ( as put means you are

betting down only which means you are shorting )

Now , there is a concept of shorting call & put options.But Ill not be
discussing that part here as that part is an advanced level studies of
using call & put option trades.Once you are used to trading LONG
CALL & LONG PUT then you can think about learning shorting call &
put option which is covered in my training courses for paid
members.

Remember these points :

In equity stocks, you can long a stock today & sell it after 2 days or
whenever you wish after 2 days.

In future & options, you can long a stock future today & youll have
to sell within the particular timeframe youve chosen.So you can
buy today & sell today or tomorrow or after 5 days but the time-
limit you have chosen will be your last day of holding that stock
future contract.

In equity , you can short a stock today but you cannot hold it for
next day hence youll have to exit the long position by today itself.

In future & options, You can short a stock future contract today &
hold it till your chosen expiry date of that contract.

Equity market is known as CASH MARKET & future-option market

known as DERIVATIVE MARKET. Usually medium to long term
investors invest in cash market & very short term traders trade in
derivative market.There are people who trades both the market to
diversify their capital investment.

Brokerage structure is different for derivatives & equity market.Here

are the recommended brokerage structure:

Equity transactions for positional trades : 0.2% on transaction value

Equity transactions for intraday trades : 0.02% on transaction value

Future transactions for intraday & positional : 0.02% on transaction

value

option transactions for intraday & positional : Rs 30 per lot

Any broker charging you higher than above structure is really

charging you too much.

Very important term :

INDEX = SENSEX & NIFTY ????????

These two terms you must have heard thousand times sensex &
nifty !!!!!!!!!!

In india, we have thousands of companies in stock market.All these

companies come from different sectors like from banking sector we
have icici bank,axis bank etc, from auto sector we have
bajajauto,tatamotors etc. So we have two different parts of trading
instruments available in market:

One is a sector & other is companies on that sector.

In stock market, you can trade a single stock like infosys and also
you can trade a sector from where it comes like IT sector which is
called CNXIT .SO taking all the IT companies listed in NSE, the
exchange formed price calculation based on those IT companies
share price movement in stock market hence a particular figure
comes out which is called CNXIT & this types of figures are known
as INDEX.So if we want to checkout how the IT sector is performing
in india, we can have a look on CNXIT INDEX momentum & judge
the growth of overall IT companies.If on someday, all the IT
companies share prices are falling,then CNXIT INDEX price will also
dive down.

If you believe, out of entire IT sector, Infosys will do well

individually, you can invest in the stock alone or if you want to play
it safe & want to invest in entire IT sector,then go for the sector
investment. Likewise, combining all the sectors' major players, nse
has formed NIFTY INDEX where they have chosen 50 different
topmost companies coming up from different sectors. So if on
someday all these 50 companies prices are falling, then nifty index
will also fall.BSE has chosen 30 topmost companies to form another
index called SENSEX.Trading all these index is much more safer
instead of investing in a single company stock as you can invest in a
pool of 50 topmost company in a small portion with the same
money using index.

Using equity segment, you cannot invest in any of these index

directly.To trade on these index,youll be trading in derivative
section using future & options. Mostly we trade in NIFTY future &
BANKNIFTY future in index section.

Finally, a few important lines for beginners in this market:

As a starter, you should open a demat & trading account first with
the help of a broker.Choose you broker carefully as if he misguides
you,you can face lot of problems in your initial days.So choose a
good branded broker rather than going for some random brokers.I'll
suggest you to open your accounts under a broker's branch office &
not under a franchisee shop of that broker.If you can open your
account in the broker's main branch office ,nothing better than that
as you'll get the best service from there.

So, what we discussed above are the basic understandings of indian

stock market trading & next few articles we'll be learning about
indian commodity,currency & international forex market trading.
Once you're tuned up with the basic ideas we discussed here,i'll
suggest you to read the article regarding TECHNICAL ANALYSIS. As
you'll have to learn technical analysis next, to know which stock to
trade & where to buy/sell.