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Uploaded bySumit Behura
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Trading system in stock exchange

The document provides an overview of how stock exchanges work. It discusses that a stock exchange is a regulated market where brokers can buy and sell stocks, bonds, and other securities. It also describes the two phases of trading that occur - brokers first execute orders for their clients, then securities and cash are exchanged between traders using clearing houses and depositories. The document then discusses different types of trading systems, order types, speculators, and the basic process an investor follows to trade securities through a broker.

Education◦
Presented By:- Sumit Behura Debasis Das Santosh Rout
 Stock exchange is an organized and regulated financial market where brokers and traders can buy and sell stocks, bonds and other securities.  It is also called secondary market.  Trading in a stock exchange takes places in two phases:- in the first phase, the member brokers execute their buy or sell orders on behalf of their clients and in the second phase, the securities and cash are exchanged.  For the exchange of securities and cash between traders, the service of two other agencies are required, namely clearing house(corporation) of the stock exchange and the depositories.
 The system of trading in stock exchanges for many years was known as floor trading.  In the new electronic stock exchanges which have fully automated computerized mode of trading, floor trading is replaced with a new system of trading known as screen-based trading.  Screen-based trading are two types 1. Quote driven system 2. Order driven system
 Under the quote driven system the market- maker, who is a dealer in particular security, input two way quotes into the system that is bid price and offer price .  Under the order driven system clients place their buy and sell orders with the brokers.
 An investor may place two type of order namely- market order or limit order .  Market order-In market order the broker is instructed by the investor to buy or sell a stated number of share immediately at the best price in the market.  Limit order- It is an order for the purchase or sale of securities at a fixed price specified by the client. “ buy at Rs. 50 or less” “ sell at Rs. 60 or more” No guarantee that limit order will be executed
 There are certain types of orders which may used by investors to protect their profit or limit their losses. Stop orders:-  It is used by investor to protect a profit or limit a loss  It is an order to sell as soon as the price falls up to a particular level or to buy when the price rises up to a specified level. This is mainly to protect the clients against a heavy fall or rise in price. So that they may not suffer more than the specified unit.
Stop limit order:-  The stop limit order gives the investor the opportunity of specifying a limit price for executing the stop orders.  The maximum price for a stop buy order and the minimum price for a stop sell order.  With a stop limit order, the investor specifies two prices, a stop price and a limit price. When the market price reaches or passes the stop price, the spot limit order becomes a limit order to be executed within the limit price.
 Trading in stock exchange takes place continuously during the official trading hours. Stock exchanges are open five days a week, from Monday through Friday. An investor may place orders for trade through his broker at any time during the official trading hours.  Day order :- A day order is an order that is valid only for the trading day on which the order is placed. If the order is not executed by the end of the day , it is treated as cancelled.
 Week orders:- These are orders that are valid till the end of the week during which the orders are placed. They expire at the close of the trading session on Friday of the week.  Month orders:- These are orders that are valid till the end of the month during which the orders are placed. Month order expire at the close of the trading session on the last working day of the month.
 Open orders:- Open orders are orders that remain valid till they are executed by the brokers or specifically cancelled by the investor. They are also known as GTC orders.  Fill or Kill order:- These order are also known as FOK orders. These order mean to be executed immediately, If not they are to be treated as cancelled.
 Speculator Are traders who intend to make high returns within a short time, making short term profit from the fluctuation in prices of securities in the stock market  Types of Speculator-Traders engaged in speculative activity in the stock market are described by different names based on the types of activity they generally engage in. They are Bulls, Bears, Stag and Lame duck.
 A trader who expects a rise in price of securities is known as a bull.  He takes a long position with respect to securities.  he buys the securities to sell them at future date at the higher price  The bulls will able to make profit only if the prices rise as anticipate otherwise they will suffer losses.  When the prices of securities are generally rising in the market the market is said to be in a bullish phase.
 A bear is a speculator who expects a decline in the prices of securities.  He takes a short position on securities by engaging in short sales.  He attempts to cover of his short position by buying the securities at lower prices when prices decline.  The bear will suffer a loss if the prices of securities rise after he takes a short position on securities, when there is a general decline in prices of securities in the stock market, the market is said to be bearish.
 He is speculator when the bear operator finds it difficult to deliver the securities to the consumer of rise in prices of securities subsequent to short sale on a particular day as agreed upon , he struggles as a lame duck in fulfilling his commitment .
 A stag is a trader who applies for shares in the new issues market just like a genuine investor. A stag is like the bull and expects a rise in the prices of securities that he has applied for.  He anticipates that when the new shares are listed in the stock exchange for trading , they would be quoted at a premium, that is, above their issue price. As soon as the Stag receives the allotment of shares, he would sell them at the stock exchange at the higher price and make a profit .  A stag is said to be a premium hunter.
1. Selection of a broker: The buying and selling of securities can only be done through SEBI registered brokers who are members of the Stock Exchange. The broker can be an individual, partnership firms. So the first step is to select a broker who will buy/sell securities on behalf of the investor.
2. Opening Demat Account with Depository: Demat (Dematerialized) account refer to an account which an Indian citizen must open with the depository participant (banks or stock brokers) to trade in listed securities in electronic form. Second step in trading procedure is to open a Demat account.
3. Placing the Order:  After opening the Demat Account, the investor can place the order. The order can be placed to the broker either personally or through phone, email, etc.  Investor must place the order very clearly specifying the range of price at which securities can be bought or sold. e.g. “Buy 100 equity shares of Reliance for not more than Rs 500 per share.”
4. Executing the Order: As per the Instructions of the investor, the broker executes the order i.e. he buys or sells the securities. Broker prepares a contract note for the order executed. The contract note contains the name and the price of securities, name of parties and brokerage (commission) charged by him. Contract note is signed by the broker.
5. Settlement: This means actual transfer of securities. This is the last stage in the trading of securities done by the broker on behalf of their clients. There can be two types of settlement. a) On the spot settlement:  It means settlement is done immediately and on spot settlement follows. This means any trade taking place on Monday gets settled by Wednesday. (b) Forward settlement:  It means settlement will take place on some future date. All trading in stock exchanges takes place between 9.15 am and 3.30 pm. Monday to Friday.
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