Stock Buying and Selling – Stock Bullish and Bearish Trend – Long positions – Short positions – Stock Market Index – Depository Account


Q. What is a Member–Client Agreement form?

A. This form is an agreement entered into between client and broker in the presence of witnesses wherein the client agrees (is desirous) to trade/invest in the securities listed on the concerned Exchange through the broker after being satisfied of broker’s capabilities to deal in the same.

Q. What is Buying and Selling?

A. There are several types of orders that you can dictate to a broker. The most common type, which is a regular buy or sell order, is called a market order. Another type of order is a limit order wherein you ask the broker to trade only if the price reaches a specific level. In a stop order, you tell the broker to sell your shares if the price drops to a certain level to prevent significant loss because if it drops to that level it is likely to drop further and your losses are likely to increase.

Q. How do I place my orders?

A. Trading can be done via the phone or by coming in person to the office or through any other facility provided by Broking Firms like Internet trading. The dealer (employee of  Broking Firm who is supposed to input the investors order into the stock exchange order system) after checking the authenticity of the person calling and after checking the margin available in the account would put/enter the order into the stock exchange system.

Q. What is meant by bullish and bearish trend?

A. When the market goes up it is called a bullish trend and when the market goes down it is called a bearish trend.

Q. What is taking a position?

A. When you act upon a stock and buy into it, you are taking a position. A position is an amount of money committed to an investment in anticipation of favorable price movements.

There are two kinds of positions : –

  • Long positions are what most people do. When you buy long, that means you are anticipating an upward movement in the price, and that is how you profit. People usually buy stocks at prices expecting to sell them later at higher prices and hence make profits.


  • Short positions are the tricky ones. When you buy short, you are anticipating a fall in the price and the fall is the source of your profits. The shares will be sold and when the price falls they will be repurchased and given back and the difference is the where the investor profits. Of course, the investor who borrowed the shares carries the risk of not having the price move as anticipated, in which case he may lose money in repurchasing the stocks.


Q. What is an index?

A. An index is a stock-market indicator created as a statistical measure of the performance of an entire market or segment of a market based on a sample of securities from the market. An index is thus a means to evaluate the overall performance of a market or of a segment of the market. An index measures aggregate market movements.

Apart from being a general market indicator, indices are used as a benchmark to evaluate individual portfolio performance. Professional money managers will always try to outperform the market, i.e. they will always try to do better than the indices. For example, if the value of a portfolio moves up by 10% while the index moved up by only 5% then the portfolio is doing better than the market.

We have 2 renowned indices viz.

    • BSE Sensitive (BSE Sensex) and

  • S&P Nifty 50 (Nifty) BSE Sensex comprises of 30 large-cap companies. As the name suggests, it is a premier index on Bombay Stock Exchange (BSE). Nifty comprises of 50 large-cap companies on the National Stock Exchange (NSE).


Q. What is Methodology of trades?

A. The market watch, i.e the screen kept open normally on the trade screen would show the following columns – 1. Best bid price 2. Best bid quantity 3. Best offer price 4. Best offer quantity 5. Last traded price

The first 2 columns as given above show the available buyers for a particular share in the stock exchange and the next 2 columns show the available sellers, and the fifth column shows the price at which the last trade took place. Hence when a investor wants to buy a share at “market price” ideally the 3rd and the 4th column would depict how many shares one can get at a stipulated price. The client can also put a limit price order which would sit in the order book till it reaches a price time priority when the trade can be executed.

Q. What is a Contract Note?

Contract Note is a confirmation of trades done on a particular day on behalf of the client. It establishes a legally enforceable relationship between the client and Brokerwith respect to the settlement of the trades. The Contract Note would show settlement number, order number, trade number, time of trade, quantity and price of the trades, brokerage charged, etc and it would be signed by an authorised person of Broker.

Q. What is pay-in day and pay-out day?

A. Pay-in day is the day when the broker shall make payment or delivery of securities to the exchange. Pay-out day is the day when the exchange makes payment or delivery of securities to the broker.

Q. What is a depository?

A. A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities. There are two main depositories in India, namely, a) National Securities Depository Ltd. (NSDL) and b) Central Depository Securities Ltd. (CDSL), both of which are regulated by SEBI. Broker Securities Ltd is a Depository Participant of NSDL and will hold your securities in electronic form.