Online Share Trading and Demat Accounts

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With multiple online platforms, trading on the National Stock Exchange, BSE and other markets is possible — all from demat and trading accounts accessed through your computer or mobile phone. But while online trading is a versatile way to invest your money, it does carry some risk. Find out how to start trading online and what your many options are.

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What is stock trading online?

Trading is a more involved approach to investing and is also referred to as buying shares or other investment products.

Shares, or stocks, are partial ownership of a company. Instead of borrowing money to raise capital, companies sell shares to raise funds for expansion.

Compare online brokers to trade gold stocks, ETFs and CFDs

Data indicated here is updated regularly
Name Product Number of stocks CFDs Shares Available Markets Link
Sharekhan
All NSE/BSE listed stocks
No
Yes
Available in 72 countries
Go to site
More info
Upstox
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
Motilal Oswal
100+
No
Yes
IN, US
Go to site
More info
Saxo Markets
19,000+
Yes
Yes
AU, CN,CZ, DK, ES, FR, TW, HK, IT, HU, SA, NE, NO, PL, RU, SG, CH, UK, JP
Go to site
CFD service. Your capital is at risk.
More info
CFD Service. Your capital is at risk.
5paisa
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
Religare
Religare
All NSE/BSE listed stocks
No
Yes
IN
Go to site
ICICI Direct
All NSE/BSE listed stocks
No
Yes
India and rest of the world.
More info
Bajaj Finserv Securities
All NSE/BSE listed stocks
No
Yes
IN
More info
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Types of online trading

Online trading is a broad term that refers to different ways to buy and sell assets, such as shares, online. Here are some of the more popular methods:

Stock trading

Stock trading

Traders buy and sell company shares through stock markets, which provide continuous updates on the prices of those shares. The value of a company’s shares changes daily, so shareholders aim to make a profit by buying shares when they cost less and selling them when they cost more. You can expect transaction fees for buying and selling.

Option trading

Option trading

Options are essentially a bet on how you think a stock will move within a set time. If you purchase a contract of 100 shares, that gives you the right, but not the obligation, to buy or sell a stock at a certain price, called the strike price, within a certain time frame. Here are two options:

Call. If you believe the price of a stock will go up by the expiry date, you buy a call option contract. This gives you the right to buy shares at the strike price. If the share price is higher than the strike price, either buy the shares at a discount when the contract expires or buy and immediately sell the option for a profit.

Put. If you think the price of a stock will go down by the expiry date, buy a put option contract. This gives you the right to sell the shares at the strike price. If the share price drops below the strike price, you could buy shares at market price and sell them at the strike price.

Bond trading

Bond trading

Bonds are issued by companies or governments to generate cash flow, finance debt, fund investments and more. Bonds have predetermined term lengths and pay interest (also called the coupon rate) at set intervals for the length of the term. Once the bond reaches maturity, it can be cashed for the principal amount.

A bond’s value can fluctuate based on the current general interest rates, so some traders buy and sell existing bonds on secondary markets. If general interest rates drop, the market value of bonds typically increases, whereas if they rise, the value of bonds typically drops.

Forex trading

Forex trading

Foreign exchange (forex) trading is the process of buying and selling currencies. Unlike the stock market, the forex market is not one central exchange but rather a network of transactions between traders. Despite being decentralised, forex is the largest financial market in the world, with over US$5 trillion in trades conducted daily. In India however, traders can only trade certain rupee currency pairs. And since exchange rates change throughout the day, traders are able to make money by buying low and selling high, just like the stock market.

Futures trading

Futures trading

Futures are based on buying or selling stocks in the future with an agreement to buy or sell the stock. When you enter into a futures contract, you’re making an agreement to buy or sell an asset at a set price on a certain date.

Swaps trading

Swaps trading

Swaps, like forex trades, are not completed on exchanges. Instead, they are done as over the counter transactions between traders, businesses or financial institutions. Swaps are essentially a contract involving cash flows or liabilities, like loans or bonds. However, the principal amount does not actually change hands. In most cases, one cash flow is fixed, while the other is variable, often based on a benchmark interest rate, floating currency exchange rate or index price.

cryptocurrency

Crypto trading

Crypto, or digital currency, trading is very similar to stock trading in that it involves buying or selling assets to make a profit. Just like stocks, there are numerous cryptocurrencies out there, allowing you to pick and choose where to invest your money. Once you purchase cryptocurrency on an online exchange, you can either sell it, hold on to it, or buy other assets like stocks, other cryptocurrencies or even goods and services.

Forwards trading

Forwards trading

Forwards trading is just like futures trading but with more flexibility. While futures contracts include a set number of a specific asset at a predetermined delivery date, forwards contracts allow you to customize the terms. The contract holders make an agreement to buy or sell the asset, aiming to make a profit by predicting price movements.

Benefits of online trading

There was a time when all trading was done through brokers, which made it tough to get into if you didn’t have the money, time or connections. Today, there are all sorts of online trading platforms and apps that offer benefits that were unheard of 20 years ago. Some of the benefits on online trading are:

  • Flexibility. Most platforms are free and allow you to trade from anywhere with an Internet connection.
  • Multiple asset classes and trading methods. Trade thousands of stocks, bonds, ETFs and other assets using methods like options contracts and futures.
  • Tools. There are all sorts of resources, tools and indices that can help you understand the ins and outs of online trading.
  • Real-time updates. Monitor asset prices and stock market news from your phone, tablet or laptop.
  • Instant trades. Transactions are completed almost instantly, allowing you to trade on the go and keep up with the markets.
  • Low cost. Many websites and platforms will only charge a commission fee, allowing you to keep more of your earnings.
  • Unbiased trading. Online trading allows you to do your own research and trades, meaning you may be less influenced by brokers or financial advisors who are after a commission.

What are the risks of trading?

Online trading allows almost anyone to start investing, but that doesn’t guarantee that you’ll earn money. Just like any other investment, there are a few things to watch out for:

  • Risk. Stocks, foreign currencies and other assets are volatile and tough to predict, so there’s no guarantee that you’ll earn money or break even.
  • Fees. While fees may seem low, you’ll pay commission on every trade, which can quickly add up. Plus, sign-up fees, transaction fees and other charges are not unheard of.
  • Steep learning curve. Besides your research and intuition, there’s nobody telling you how to trade. You’ll need to practice to better understand online trading, otherwise, you risk losing your money.
  • Easy and addictive. Since making a trade is as simple as opening an app or visiting a website, it’s easy to get hooked on online trading. And if you aren’t seeing the returns you expected, you may be tempted to put more of your money at risk.
  • Internet dependent. You’ll need an Internet connection to trade online, so if that fails, you could miss out on trades or important information.
  • Scams. Watch out for unsolicited offers to invest your money or platforms that claim to be stacked in your favour — there’s usually a catch.

How do I get started with online trading?

While online trading can seem overwhelming, getting started is actually very easy. However, with such a steep learning curve, it doesn’t hurt to get a little practice before you jump in. Consider paper trading until you understand the basics or graduate to an online trading account, then consider charting software for more advanced trading.

Open a demat and a trading account

To start trading, you’ll need to have a demat account and a trading account. Demat accounts hold assets you have purchased, while trading accounts are used to trade them. Fortunately, you can conveniently access both seamlessly, by creating a demat account and then creating and linking a trading account to it, through the same platform.

Several platforms can provide this service, and you’ll need to decide which platform is best for you. The process will vary for each platform, so make sure to consider ease of use when choosing a product. Compare your options to find a platform that offers the features, fees and capabilities that you want, then sign up to start trading.

The steps will vary depending on what type of trading you want to do, but will often be:

  1. Compare the available demat account options
  2. Visit the website or mobile app of your preferred platform.
  3. Open an account.
  4. Enter your personal information and any other details.
  5. Fill out your investment preferences or configure your portfolio.
  6. Link a trading account to your demat account and deposit funds for trading.
  7. Make your trades.

Paper trading

Paper trading is a great way to get a better understanding of online trading. It allows you to make theoretical trades based on simulated or actual market data so that you can practice trading. It’s easy to get started:

  1. Find a company or website that offers paper trading.
  2. Sign up using your email and any other contact information (no bank account info is necessary).
  3. Build your portfolio.
  4. Monitor markets and trends.
  5. Buy and sell assets, learn various instruments and explore markets.

Charting software

For more advanced traders, charting software and market research reports may improve your trading abilities. They’ll provide a more in-depth look at various markets and can help you develop trading strategies to reach your short and long-term financial goals.

  1. Research different software and providers
  2. Once you’ve found the right product, visit the website to sign up.
  3. Sign up by providing your personal information and any other details.
  4. Link your online trading account to make trades directly from the charts.

How can I choose the best share trading platform for me?

With so many platforms and online trading products available, it’s important that you compare your options to find the right one for your situation:

  • Compare the selection. Think about the features, assets and instruments to find a platform to meet your needs.
  • Compare commission fees. Some brokers and trading platforms charge extra for orders or specialised investment products. High-value trades are often charged as a percentage of the total trade value, rather than a fixed fee.
  • Availability of advice and research options. Online platforms usually offer market news and updates and other research tools that will let you investigate the trading history of individual stocks.
  • Integration with bank accounts. Some services let you transfer money easily from your trading account to a savings account. Others offer linked debit cards to use with your accounts.
  • Integration with technology. Consider how each platform integrates with your mobile device, bank account, apps and other technology.

Bottom line

Online trading platforms make it easy to open demat accounts and invest in stocks, bonds, foreign currencies and other assets at any time, no matter where you are. Most offer multiple ways to trade, creating new opportunities to earn money and allowing you to diversify your portfolio. But online trading can be complicated, so make sure you understand how it works before diving in. Once you’re ready to trade, compare your options to find a platform that suits your trading needs.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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