Difference between Demat and Trading account

What are the top three things a trader or investor must never do in the market?

The top three would be:

1. Avoid Overtrading

Overtrading is one of the biggest mistakes traders make, and it often stems from emotions. No one has a 100% success rate in trading or investing. For example, someone might have a strike rate of 60% or even 70%, but inevitably, you will lose money three to four times out of ten.

Typically, when traders face losses, they try to recover them by becoming more aggressive, leading to overtrading. This mentality can further amplify losses. So, the first and most important rule is: don’t overtrade.

2. Avoid Overleveraging

Another common pitfall is overleveraging. When traders try to recover losses or increase their profits, they often increase their bet size, which can expose them to much higher risks. This approach is not sustainable and can lead to significant losses.

To manage your risk effectively, always avoid overleveraging your positions.

3. Avoid Averaging Losing Trades

Averaging losing trades is another mistake to steer clear of. For example, if you buy an option at a certain price and its value drops by 20%, some traders buy more. If it drops by 40%, they buy even more. This approach only compounds losses.

Instead, focus on averaging winning trades. Add to your positions when they’re performing well, and exit all positions if the trend starts to reverse. This way, you can ensure a net profit.

In Summary

The top three things to avoid in the market are:

• Overtrading
• Overleveraging
• Overaveraging

By avoiding these common mistakes, you can manage your risks better and improve your chances of success in trading or investing.

Understanding risk-to-reward ratio is crucial. To succeed in trading, your profits must be bigger than your losses. Watch this video to learn how important it is to have a good risk-to-reward ratio to be successful in trading

Trading is not only about buying and selling; a trader's psychology also plays a crucial role in achieving success. Watch this exciting video to learn more

Understanding DP charges

DPs are depository participant like ICICI Bank. DPs charge a fee to open and maintain demat accounts. These include:

1. Account opening charges

   What you pay to open an account. However, few DPs may waive this charge.

2. Annual Maintenance Charge

   AMC is an annual fee to maintain a demat account.

3. Transaction Fees

   Fees per transaction is small percentage or a flat fee.

4. Custodian Fees

   Paid monthly to the central depository based on the number of the securities in your account. These are usually waived.

5. Other Charges

   You may be charged for requests such as dematerialization of shares, rematerialization, account statements etc.

What is Intra-day trading?

Intraday trading, is the act of buying and selling the stocks within the same day. Traders buy and sell stocks during regular market hours and close their open positions before the market closes.

How to pick stocks for Intra-day trading? (5 Simple Strategies)

1. Trade in liquid stocks

   Liquid stocks are traded in large volumes and allow you to enter and exit positions as needed.

2. Pick stocks with medium volatility

   Pick stocks with a reasonable amount of movement within a day but use the stoploss feature to minimise potential losses.

3. Buy stocks that you understand

   Trade in stocks that you have followed, tracked and know about. Avoid trade in stocks that you have no knowledge of; or which are manipulated or move based on rumours.

4. Avoid penny stocks

   Avoid trading in stocks which are available at very low prices i.e. in single digit prices.

5. Make focused investment based on research

   Don’t trade in too many stocks. Do your research and focus only on a few stocks that you can track and review easily.

Pre-requisites for intra-day trading

Have a trading or demat account and a bank account.

What is AMC?

AMC is the annual maintenance charge that you pay for your demat account.

Is the cost the same across DPs?

No, each DP may charge different rates as AMC.

Can I get a discount?

Some DPs do waive these charges for the first year after opening the account.

Do I have to higher AMC charges for a 3-in-1 account?

No, charges are the same for the demat account, whether it forms part of a 3-in-1 account or not.

Are DPs that charge lower rate better?

Considers factor like the quality of customer support, and the network the DP has.

What is Portfolio Investment Scheme?

Under RBI’s PIS, NRIs can open a 3-in-1 account to invest in Indian stocks which integrate your banking, broking and demat accounts.

NRIs need to maintain two types of demat accounts, repatriable and non-repatriable.

Based on the type of account you need, fill up the application and submit your KYC documents.