Abstract
On line trading system allows an investor to trade in various financial instruments. There are two types of transactions, which are recognized in this trading system. They are “buy” and “ sell”. While buying is simple, selling needs to be thoroughly understood. Sell may be selling short and selling long.
The On line trading system serves as a means by, which individuals may invest in a number of investment vehicles. This may be done from the comfort of ones office or house. On line trading system also allows an investor to compare different quotes. One may trade the following financial instruments in online trading system.
Mutual Funds
Equities
Futures
Commodities
Tax saving certificates
Forex or foreign exchange
IPOs (Initial Public Offer)
Derivatives
On line trading system enables a “paperless” transaction. The norms and features of the service provider should be well understood prior to engaging in on line trading system. One should also read in between the lines, the negligence of, which may lead to severe financial loss.
Types of transactions:
“Buy” as well as “Sell” are the two known forms of primary transactions. The concept of buying is not complicated. One needs to understand the norms pertaining to the “Sell” transaction, which is further divided in to:
“Selling short”
“Selling Long”.
Selling long:
When a trader is disposing off his shares from the demat account, the trader is “selling long”. The proceeds of sale is directly credited to the demat account.
Selling short:
It is possible for an individual to earn money without actually owing the shares by a process, which is referred to as selling short. This process of trading is usually availed of when the market conditions are very sluggish. The traders buy the shares when the price of the shares drops. In this type of trading, the first transaction is known as “sell” and the transaction following that is referred to as “buy”. However, it is obligatory that the transactions have to be completed within the same day before the stipulated time gets exhausted.
