The Trading Procedure On A Stock Exchange – Explained!

Trading Procedure On A Stock Exchange

The conventional ways of trading securities on the stock exchange are long gone. Currently, the trading is conducted electronically using computers and laptops. Although before the transaction, the companies must list their stocks or other securities on the stock exchange. It is a crucial step and must be done perfectly. First you can choose the best fx trading platform. It is the process of being publicly available to the general audience, and thus the people invest their capital in the company’s shares. Although, once the stock exchange and other regulatory authorities are satisfied with the company’s terms and conditions, then only they are allowed to list their securities on the stock exchange.

Trading Procedure On A Stock Exchange

Benefits Of Listing The Securities

The businesses receive a few benefits by listing their securities on the stock exchange. Take a look!

  • More capital
  • Better visibility in the market
  • Enhanced employee morale
  • Liquidity
  • Efficiency
  • Effectiveness and transparency

Stock Exchange And The Trading Procedure

As mentioned above, electronic trading has replaced the conventional trading procedure. Currently, paperless and cashless transactions take place. Although, the stock exchange adheres to a particular trading procedure. Thus, it is imperative to follow the trading procedure for effective and efficient trading.

“The market can stay irrational longer than you can stay solvent. – John Maynard Keynes”

Trading Process

Following are the complete steps of the trading procedure. Once the trader follows these steps, the overall trading experience enhances significantly.

1. Broker Selection: The primary step of the trading platform is to select a quality stock exchange broker. The broker can be an individual, company, or partnership. The brokers conduct transactions on behalf of the individual or the speculator. The individuals can buy and sell the securities through a broker only, and there is no other way of undergoing a transaction. Hence, finding a SEBI registered broker for your transactions and other trading activities is significant.

2. Opening a Demat Account: The next significant step is to open a Demat account with a depository or a financial institution. For trading the securities electronically, it is imperative to open a Demat account. It is also called dematerialised account and is highly essential for the trading process. In the absence of a Demat account, the individuals cannot pursue trading. Depository here stands for a financial institution that holds different financial securities. There is no direct link between the depository and the investor in a general sense. Generally, the depository connects with the investors via depository participants. The participants maintain a communication link between the investor and them and tell them about the current status of their holdings.

Video Credit – Absurd X

3. Order Placement: Once you can check the fx trading review then you can select the broker and open the Demat Account, it’s time to start trading. Therefore, the stage of order placement begins. The individuals can place the orders according to the investor’s convenience. Phones, emails, and DP are the methods available to place an order. Although the investors must place the orders clearly, all the details must be mentioned clearly. In some instances, the order, once placed, cannot be canceled. Hence, complete caution must be exercised while placing the order.

4. Order Execution: The investor places the order, and the broker executes the order on behalf of the investor. The broker’s map out a contract note. The contract lies between the brokers and the investors. The contract note contains the details of the securities purchased, time and date of purchase, parties included, and commission charged. The broker duly signs the contract note and thus legally binds both the parties.

5. Order Settlement: The order settlement is the transfer of securities from one party to another. It is the last step conducted by the broker for its clients. The order settlement is of two different types. These are as follows:

  • On The Spot Settlement: It refers to the immediate settlement of the transaction and operates on the formula of T+2. If a trade is conducted on Monday, the securities will be transferred by Wednesday.
  • Forward Settlement: It refers to the future settlement of the transaction and operates on the formula of T+5 or T+7. If the trade is conducted on Monday, the securities will be transferred by Friday.

Therefore, the investors must follow the complete trading process to get the best trading experience and earn high returns.

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The Trading Procedure On A Stock Exchange – Explained!

by John Doe time to read: 4 min