In order to start share trading in India three types of accounts are necessary, a trading account with a broker, a Beneficial Owner account with a Depository Participant and a bank account. It is advisable to go for an online trading account rather than an off line account with a broker. Online share trading allows trading of a single share as well. Online share dealing is possible through banks that offer online banking or core banking facilities. Most online stock trading companies have tie-ups with banks for online transfers; therefore once you select your online stock broker, even they will also guide you through the process.

The account opening form of the broker has four components. The Know Your Client (KYC) Form, separate agreements for share trading on BSE and NSE, Risk Disclosure Document and certain power of attorneys that are given. Ensure you read the power of attorney carefully and you are authorizing only for delivering shares to exchange on your behalf against your sale trades and not for any thing else. The KYC form captures your contact details and your financial worth. This Form is also accompanied with Proof of your identity, proof of your residence and Permanent Account Number (PAN) card. Proof of identity can be given by submitting a copy of your Passport, Voters card etc. You need to get your photograph attested by your banker. Proof of address is ration card, latest electricity bill etc. All documents should be produced in original for verification.

The next document is a set of agreements between the share broker and the client. This agreement has to be separately signed for BSE and NSE. Both the agreements are identical and have been prescribed by SEBI. There is also a separate agreement for Depository operation between the Depository Participant and the Beneficial owner. If you are working through a sub share broker then there is a tripartite agreement between the share broker, sub share broker and client. This agreement allows you to do only cash market trades; in case you want to deal on derivatives market then a bipartite agreement is required. All these agreements have to be stamped.

You have a choice of opening your depository account with an entity who specializes only in rendering depository services or with the share broker with whom you are about to register. But if you opt for online share trading facility than the aforementioned choice will not be available and invariably you will be asked to open depository account with the share broker you opt.

It is easy to maintain, simpler and hassle free if the depository account is with the broker because it allows them to deliver shares to the exchange on your behalf.

Make sure you read the risk disclosure document before signing and submitting to the share broker. This document will explain the different risk involved with your transaction for which you will be responsible. There is an inherent risk of price variation (volatility) of the securities you have dealt in, risk due to low liquidity in a particular company, risk due to more than normal difference between a person wanting to buy and another wanting to sell. The document also explains certain risk mitigation measures that can be used by you.

On submitting the completed set of document the broker will scrutinize and if found everything in order will allot a code normally referred to as client code to you. You may need to furnish this code every time you want to transact. In case you have opted for Internet based account you will also be allotted a password against your login id that will be mapped to your client code. Normally you will be forced to change the password immediately on the first log in. You must take care not to part with your log in ID and password to anybody including any person from your broking office to avoid misuse of your account.

Having got your client code you can share dealing or trading. However you need to ensure you have paid the requisite margin money as stipulated by your broker to place any transaction. Initially you start with placing orders in small quantity between 1 to 10 shares. Once you have understood the system in full you may gradually increase the size of your transaction. On mastering investing in equity cash segment then you may gradually look at derivative segment to gear your capital and for hedging your portfolio.