For one who wants to trade or invest in the share market, there are only a few requirements that he needs to take care of. The first one is to have trading, and demat account opened. Here one needs to note that those who want to invest only do not need to have a trading account. They can get the share directly to their demat account if they are provided with the same in an IPO. If one wants to get the shares from the open market, he needs to have a trading account also. One needs to note that the trading account can be with a different broker, and demat account can also be with some different broker.
The margin:
For a trader, it is required to provide valid documents to the share broker or broking company. He also needs to offer margin money to the broker, which can help him get the limit opened. It is the limit only on the basis of which the trader can trade in the market. Every company or broker has some rules for offering the limit. In case one wants to have safe and restricted trading, it is better to go for the lowest margin stock broker as more limit may induce one to have more trading, which may also attract more loss. For the broker, it can be in his interest as more trading will lead him to have more income in the form of brokerage. However, for a trader, it may not be that much good.
If the margin is low one may have trades to a certain extent only and hence can refrain from making a loss in the bearish market. Therefore in some cases, it is good to have an account with the lowest margin stock broker. However, for those who have the good risk-bearing capacity, it can be tough to maintain such limit, but for such clients, the brokers also understand and offer more limit what they deserve to have bulk trades.
The trades in cash and derivative segments:
For the trader, these both options are good as far as profit-making is concerned. However, before going for any of them, one needs to check all the aspects. In the cash segment, one has to go with low investment, and low risk as the number of trade is limited to a few shares only while in derivatives, there is no number of shares. One has to go for a contract which may be of one to three months with a specific value. Hence here, one needs to have more margin money as with that only he can have more credit limit. The risk and probability of makinga profit are also high in this option.
Due to high risk, it is the option for those only who have good research and command on trading as with a low value of the contract; one may have to incur a huge loss also. The contract can be renewed after the given period, or one can go for a new contract when one contract expires.
