How Buying and Selling Shares Works: Step-by-Step for Beginners

Many beginners think buying or selling shares is complicated.
In reality, once you understand the step-by-step flow, it becomes very simple.

In this article, you’ll learn how buying and selling shares actually works, what happens behind the scenes, and how money and shares move—explained clearly and calmly.

What Happens When You Buy a Share?

When you buy a share, you are purchasing ownership from someone else who wants to sell.

You are not buying directly from the company (except during an IPO).
You are buying from another investor in the secondary market.

Step-by-Step: How Buying Shares Works

Let’s break it down into simple steps.

Step 1: You Place a Buy Order

Using your trading account, you select:

  • The company’s share
  • Quantity (number of shares)
  • Price (market price or limit price)

You then place the buy order.

Step 2: Order Goes to the Stock Exchange

Your broker sends your order to the stock exchange.

The exchange looks for:

  • A seller willing to sell at your price

If a match is found, the trade is executed.

Step 3: Trade Is Executed

Once matched:

  • You become the buyer
  • Someone else becomes the seller
  • A trade price is fixed

At this point, the trade is confirmed—but settlement is still pending.

Step 4: Shares Are Credited to Your Demat Account

After settlement (usually within a couple of working days):

  • Shares move into your Demat account
  • Ownership is officially transferred to you

You can now see the shares in your holdings.

Step 5: Money Is Debited from Your Bank Account

The money used to buy shares is:

  • Deducted from your linked bank account
  • Transferred to the seller

This completes the buying process.

Step-by-Step: How Selling Shares Works

Selling shares follows the reverse process.

Step 1: You Place a Sell Order

Using your trading account, you select:

  • Shares you already own
  • Quantity to sell
  • Desired price

You place a sell order.

Step 2: Order Is Matched on the Exchange

The stock exchange finds a buyer willing to buy at your price.

Once matched:

  • Trade is executed
  • Buyer and seller are fixed

Step 3: Shares Are Debited from Your Demat Account

After settlement:

  • Shares are removed from your Demat account
  • Ownership moves to the buyer

Step 4: Money Is Credited to Your Bank Account

The sale proceeds are:

  • Credited to your linked bank account
  • Usually within a couple of working days

This completes the selling process.

What Is Settlement?

Settlement is the process where:

  • Shares move from seller to buyer
  • Money moves from buyer to seller

This does not happen instantly but follows a fixed timeline to ensure accuracy and safety.

Settlement makes the market:

  • Transparent
  • Organized
  • Trustworthy

Market Order vs Limit Order (Beginner Overview)

When placing buy or sell orders, you’ll see two common options:

Market Order

  • Buy or sell at the current market price
  • Fast execution
  • Price not guaranteed

Limit Order

  • Buy or sell at a specific price you choose
  • Price control
  • Execution not guaranteed

Beginners usually start with market orders for simplicity.

Do You Need to Watch the Market All Day?

No.

Long-term investors:

  • Place orders calmly
  • Don’t track prices every minute
  • Focus on goals, not daily movement

Constant watching often leads to emotional decisions.

Common Beginner Mistakes While Buying & Selling

❌ Buying in excitement
❌ Selling in panic
❌ Trading too frequently
❌ Ignoring long-term goals

Most losses come from behavior, not lack of knowledge.

How Beginners Should Buy and Sell Shares

A simple beginner approach:

  • Buy with a long-term mindset
  • Avoid frequent buying and selling
  • Invest only what you understand
  • Keep emotions in check

The fewer actions you take, the fewer mistakes you make.

Final Thoughts

Buying and selling shares is a structured and regulated process.

Once you understand the flow:

  • Fear reduces
  • Confidence increases
  • Decisions improve

The stock market rewards patience more than activity.

What to Read Next

👉 Who Are the Participants in the Stock Market? (Retail, Institutions, FIIs)

🔑 Key Takeaway

Buying and selling shares is a step-by-step process.
Trading accounts place orders; Demat accounts store shares.
Calm, disciplined actions matter more than speed.