So far, you’ve learned:
- What the stock market is
- What shares and IPOs mean
- Where shares are traded and who regulates the market
Now comes the most practical and fear‑removing question:
How does buying and selling of shares actually happen?
This lesson explains the process step by step, without technical overload.
What You’ll Learn in This Lesson
By the end of this lesson, you will understand:
- Why you need a broker to trade
- What happens when you place a buy or sell order
- How share prices are decided
- How shares and money move after a trade
- Why prices change every second
Why You Cannot Buy Shares Directly
You cannot walk into NSE or BSE and buy shares directly.
Stock exchanges are platforms, not shops.
To trade, you need a registered intermediary called a broker.
Examples of brokers in India:
- Zerodha
- Groww
- Upstox
- Angel One
Brokers provide you access to the stock exchange using technology.
What Is a Broker?
A broker is a SEBI‑registered intermediary who:
- Allows you to place buy and sell orders
- Connects you to the stock exchange
- Handles execution and settlement
Brokers do not decide prices or guarantee profits.
What Happens When You Buy a Share?
Let’s understand this with a simple flow.
Step 1: You Place an Order
You log in to your broker’s app and place a buy order for a share.
You specify:
- Which share you want
- How many shares
- At what price (or market price)
Step 2: Order Reaches the Stock Exchange
Your broker sends your order electronically to the stock exchange.
The exchange checks:
- Is your account valid?
- Do you have enough funds?
Step 3: Order Matching Happens
The stock exchange matches:
- Buyers willing to buy
- Sellers willing to sell
A trade happens only when a buyer and seller agree on price.
Step 4: Trade Execution
Once matched:
- The trade is executed
- Price is fixed
- Both parties are notified
Step 5: Settlement (Money & Shares Transfer)
After execution:
- Money moves from buyer to seller
- Shares move from seller to buyer
This happens electronically through your Demat account.
Settlement happens in T+1 or T+2 days (depending on rules).
What Is a Demat Account? (Basic Intro)
A Demat account holds your shares in electronic form.
Think of it as:
- A digital locker for shares
You do not receive physical share certificates anymore.
(Demat accounts are covered in detail later.)
How Are Share Prices Decided?
Share prices are decided by demand and supply.
- More buyers than sellers → Price goes up
- More sellers than buyers → Price goes down
Prices change because people’s expectations about a company change.
Why Prices Change So Frequently
Prices move due to:
- Company performance
- News and announcements
- Economic conditions
- Investor sentiment
Short‑term price movement does not always reflect business value.
Common Beginner Confusions
❌ Broker controls prices
❌ Stock exchange sets prices
❌ Buying means instant ownership
❌ Prices move only on news
Reality: Prices are the result of collective buying and selling decisions.
Why This Lesson Matters
Understanding the process:
- Removes fear of the unknown
- Prevents blind clicking on apps
- Helps you invest calmly
Clarity leads to confidence.
Key Takeaways
- You trade shares through a broker
- Orders are matched on stock exchanges
- Prices depend on demand and supply
- Settlement happens electronically
- Price movement is normal and continuous