Where Can I Trade Equities?

One of the most vital areas of the stock market is Equities. It gives companies access to capital to grow their business, and investors a portion of ownership in a company with the potential to realize gains in their investment based on the company's future performance. This article highlights the definition of equity, understanding the equity market and the steps you can follow to trade in equity.

What is Equity?

Equity is pieces of ownership in a public-listed company. They are bought and sold as shares or stocks, which are issued by companies to raise more money. When you buy equity, you are taking ownership of a small piece of that company. This allows investors to share any profits made by that company they have invested in.

The return from shares comes in two types - dividends and capital growth.Dividends are a distribution of profit that the company has made which is paid twice a year. Larger companies are more capable to pay out dividends than smaller ones. Typically, the more profit the company earns, the larger the dividend payouts will be for the company.

Shareholders can leverage this to make a profit by selling their shares or stocks for a higher price than they purchased. This provides traders with capital growth. It is also important to remember that share prices can go up as well as down, so you can make more profit or loss your money.

To make this process easier for investors, companies can opt to have their shares listed on a stock exchange. However, the much bigger picture is how to trade Equities online.

Understanding an Equity Market

It is essential to start with, a good understanding of what is Equity Market in the Indian Economy and how to trade in the Equity Market. It is the meeting point for buyers and sellers of stocks, often called the stock market or share market. Apart from trading, investors can purchase public or private stocks.

Public stocks are traded on exchanges, unlike private stocks which are traded privately. When an organization is set up as private initially later it has to launch its IPO (initial public offering). IPO launch makes the private company visible for public investors to invest. Private stocks of a company are available to limited investors like employees or other specific traders. Companies get listed on stock exchanges to earn more capital from public investors and use it for their company growth or expansion.

In the Indian Stock Market, equities are available for trading at the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the Metropolitan Stock Exchange of India (MSE). There are different types of Equity Market in India, roughly in two forms - spot/cash market and futures market. The spot market/cash market is a public financial market in which stocks are traded for immediate delivery. The futures market is a place where the delivery of the shares is due at a later date.

Learn how to Trade Equities Online in 4 simple steps

• Find a stockbroker:

  The first step is to find a good online stock broker and open a stock brokerage account. Research and study the account interface and take advantage of the free trading tools. Several brokers offer virtual trading. Next, you need to check the Demat and Trading account opening charges the Demat Annual Maintenance Charges (AMC), and the brokerage charges as well. To open a Demat and Trading account, you need to fill out an online account opening form with the broker. The form filling process is easy, and it takes less than 5 minutes to complete the procedure. You can choose to trade with your account or keep a separate professional trading account.

• Learn & study:

  Wealth information is abundantly available It's important to research, learn and study the trading game before diving deep. Start to follow financial articles, stock market books, website tutorials, etc, and watch the market every day in your spare time. Study and analyze the basics of technical analysis and look at price charts daily. Always keep reading, learning, and analyzing.

• Practice:

  Practice trading with virtual money for your knowledge of how the stock market works and how to use an online brokerage better. Usually, practice trading involves the use of a stock market simulator that has the touch and feel of an actual stock exchange's performance. Practice and make a lot of trades using different holding periods and strategies, and then analyze the results for obvious flaws. This practice will give you much more understanding when you start trading with real money.

• View stock details & start trading:

  Now that you are ready to get started with online trading after learning and practising, you can create your account, log in, add money and start exploring the trading platforms. You can select a share and view its brief details, historical prices, charts, etc. Once you are done analyzing, you can start buying shares and start your investment journey. You can also view the live market prices of shares in your trading account.

Difference between Equities & Stocks

Equities and Stocks are often interchangeably as there is a very fine line between Equities and Stocks. Both refer to the purchase and sale of ownership shares in public companies through stock exchanges and counter markets around the world. In the stock market world, stocks are equity shares of the company which are traded in the market. However, in the corporate world equity means ownership. When equity shares of the company are listed on stock exchanges (like BSE, NSE & MSE)) to enable the trade of ownership of the company, the equity is termed as stocks.

The key difference between the two occurs when listing shares in which a part of equity is allotted to the general public to raise capital. Post the listing, stocks can be traded on stock exchanges (could be bought and sold among the public based on return expectations from the company). With the sale and purchase of stocks, ownership of the company is transferred as well.

Therefore, all stocks are equities, but not all equities are necessarily stocks.

Equity Trading Account

To trade equities, you need to open a trading account to buy or sell equity shares in a stock market. The stock exchange primarily functioned on the open outcry system. In this process, the traders use hand signals and verbal communication to convey their buying/selling decisions. Soon after the electronic system took over the stock markets, trading accounts replaced the open outcry system.

In the electronic system, the buyers and sellers don’t have to be physically present at the stock exchange to place orders. Instead, they open a trading account online with a registered stock market broker; who operates trading on their behalf. Each trading account has a unique trading ID that is operated to perform online transactions.

A trading account acts as a link between the Demat account and the bank account of an investor. When an investor wants to buy shares, they place an order through their trading account. The same transaction processing goes for the stock exchange. The required number of shares get credited into their Demat account and a proportionate sum gets deducted from their bank account. A similar process is followed to sell equity shares. When the order is executed, the required number of shares are debited from his Demat account and a proportionate sum gets credited to his bank account.