Hook
You installed a broker app… but now you see LTP, bid/ask, market vs limit, SL, GTT, DAY, IOC and a dozen charges. Where do you even begin?
This lesson is your practical, step-by-step bridge from theory to action: set up the right accounts, understand costs, read the quote screen, and place your first order safely.
Key takeaways
- You need two things to buy shares: a Trading Account (to place orders) and a Demat Account (to hold shares electronically). open demat and trading account”
- In India, Demat is maintained with CDSL/NSDL via your broker (your Depository Participant, or DP).
- Discount brokers are low-cost and DIY; full-service brokers offer research/advisory at higher cost—choose what matches your style.
- Understand all charges before trading: brokerage, STT, exchange/SEBI fees, GST (on brokerage), stamp duty, plus Demat DP charges on sell.
- Learn to read a quote: LTP, bid/ask, spread, depth, circuit limits.
- Master order types: Market, Limit, Stop-Loss (SL/SL-M), time-in-force (DAY/IOC/GTC), AMO, GTT (broker-specific).
- India equities typically settle on T+1; check your contract note and ledger after trades.
1) Demat vs Trading account (and why both matter)
- Trading Account: the interface to the exchange via your broker; it sends buy/sell orders.
- Demat Account: your electronic locker that holds shares (no paper certificates).
- Your broker is a DP (Depository Participant) connected to CDSL/NSDL; your shares sit with the depository in your name.
KYC basics: PAN, Aadhaar (or equivalent), bank details, e-sign, live IPV, and nominee details. Always enable 2FA and SMS/email contract notes.
2) Broker types & platforms
Discount brokers
- Low brokerage, app-first, great for self-directed investors.
- Usually no in-house advisory; research is light or optional.
Full-service brokers
- Higher fees; offer advisory, research, relationship managers.
- Useful if you want hand-holding and packaged services.
What to compare:
- Brokerage & taxes breakdown, hidden/platform fees.
- Order types supported (SL-M, GTT, bracket/cover if available).
- Stability (order freezes on volatile days?), customer support, reports (PnL, tax).
- DP charges on sell (often a flat fee per ISIN per day).
- Ease of SIP/invest-in-funds, IPO, SGB, bonds, etc.
3) All the charges (so your P&L isn’t a surprise)
Not exact rates—these change—but know the buckets:
- Brokerage: per order or percentage; often very low for delivery with discount brokers.
- STT/CTT: tax on securities/commodities trades (varies by segment; delivery vs intraday differ).
- Exchange transaction charges (NSE/BSE) + SEBI fees.
- GST: charged on brokerage (and some fees), not on the entire trade value.
- Stamp duty: charged on buy (state-linked; broker collects).
- DP (Demat) charges: charged on sell delivery (per ISIN per day).
Illustrative example (not actual rates):
You buy shares worth ₹10,000. Brokerage is minimal; STT + exchange + SEBI + GST + stamp duty add a small extra. When you sell, you’ll again see taxes/fees plus a DP charge. Always check your broker’s charges page and your contract note.
4) Reading the quote screen: LTP, bid/ask, spread, depth
- LTP (Last Traded Price): the price of the last matched trade—not necessarily what you will get.
- Bid: highest price buyers are offering.
- Ask/Offer: lowest price sellers are willing to accept.
- Spread: Ask – Bid. Tighter spread = more liquid.
- Market depth: shows quantities at multiple bid/ask levels. Big gaps = potential slippage.
- Circuit limits (e.g., ±5%, ±10%): daily price bands for some stocks.
- 52-week high/low, delivery %, volume, OI (for F&O), etc.
Rule of thumb: Thin liquidity + wide spread + market order = unexpected fills. Use limits.
5) Order types you must know
Market Order
- “Fill me now at the best available price.”
- Pros: Fast fill.
- Cons: Slippage in illiquid names; price may run away.
Limit Order
- “Fill me only at my price or better.”
- Pros: Price control; avoids bad fills.
- Cons: Might not fill if price never reaches your limit.
Stop-Loss orders (protect yourself)
- SL-M (Stop-Loss Market): triggers a market order once the trigger price hits. Ensures exit but may slip in fast moves.
- SL (Stop-Loss Limit): triggers a limit order at/near your trigger. Controls price but might not fill if price gaps past it.
Simple exit setup (illustrative):
You bought at ₹100, want to limit loss to –5%.
- SL-M: Trigger ₹95; when hit, a market sell fires.
- SL: Trigger ₹95, Limit ₹94.7 (gives a price band; may miss in gaps).
Time-in-force (how long your order lives)
- DAY: valid for the trading day.
- IOC (Immediate-or-Cancel): instantly fill what you can; cancel the rest (useful in tight scalps or illiquid spreads).
- GTC/GTD: good-till-cancel/-date (not universal in India; many brokers offer GTT as a proxy).
GTT / Triggers (broker feature)
- Set a trigger to buy/sell in the future when price hits your level. Good for longer-term entries/exits without watching screens.
AMO (After-Market Order)
- Place orders after hours; they queue for next session (useful if you can’t be online at open).
Note: “Bracket/cover orders” exist at some brokers to combine entry + SL + target; availability changes—check your platform.
6) Place your first trade (guided example)
Scenario: You want 10 shares of ABC Ltd, but only if you can get ≤ ₹250.
- Search ABC → open the quote.
- Check bid/ask and depth. If ask is ₹250.10 and the spread is tight, a limit makes sense.
- Tap Buy → Limit.
- Qty = 10, Price = 250.00, Validity = DAY.
- Review charges estimate → Submit.
- If it doesn’t fill, you can:
- Wait, or
- Amend the order to ₹250.10 (if you still want it).
- Once filled, set a Stop-Loss: e.g., SL-M Trigger ₹237.50 (–5%).
- For a target, either place a Limit Sell at your target (say ₹270) or set a GTT if your broker supports it.
Journal it: Why you bought, risk planned, result. This habit beats 90% of beginners.
7) Settlement, statements & safety
- T+1 settlement for equities (in general): if you buy today (T), shares credit next day (T+1).
- After each trade, broker emails a contract note—read it.
- On sell delivery, expect DP charges (per ISIN/day).
- Keep funds usage clear; reconcile ledger, PnL, and tax reports monthly.
- Enable TPIN/e-DIS (as applicable) and avoid sharing OTPs.
- Prefer UPI/NetBanking funding directly from your bank; avoid unknown third-party links.
8) Common beginner mistakes
- Buying with market orders in illiquid stocks → ugly fills.
- No stop-loss → one bad trade wipes a month’s gains.
- Ignoring charges → wondering why profits look smaller.
- Chasing upper circuits/FOMO.
- Over-sizing positions; not diversifying.
- Confusing Demat holdings with pledged/margin collateral.
- Forgetting to square off intraday (if your broker requires it).
- Treating GTT as guarantee—triggers can skip in gaps or low liquidity.
9) Mini-FAQ
Q: Can I open multiple Demat accounts?
Yes, but keep it simple—multiple accounts complicate tracking and taxes.
Q: Is a Demat account mandatory for ETFs and IPOs?
Yes for holding equity/ETFs; the units/shares credit to your Demat.
Q: What’s better—market or limit?
For beginners, limit is safer. Use market only in high-liquidity names when speed matters.
Q: Do I pay DP charges on buy?
Typically no; DP charges generally apply on sell delivery (check your broker).
Q: Why did my SL not execute?
If you used SL (limit) and price gapped below your limit, it may not fill. SL-M increases fill chance but can slip.
10) Quick quiz (5 Qs)
- Demat vs Trading account—what’s the difference?
- Name three components of total trading costs besides brokerage.
- When is a limit order preferred over market?
- What’s the role of bid/ask and spread in your fill price?
- What’s the risk of an SL (limit) order in a gap-down?
Answers: Demat holds; trading places orders • STT/exchange/SEBI/GST/stamp/DP • When you want price control/avoid slippage • They determine achievable fill; wide spread = worse fills • It may not trigger/fill if price gaps below your limit.
11) Action checklist
- ✅ Enable 2FA; complete KYC and nominee details.
- ✅ Read your broker’s charges page; note DP charges.
- ✅ Practice placing limit orders in a high-liquidity stock with tiny qty.
- ✅ Set stop-loss on every trade; decide risk per trade (e.g., 0.5–1% of capital).
- ✅ Learn to read bid/ask and market depth before clicking Buy.
- ✅ Keep a trade journal (why/entry/exit/lesson).