Trading in the Cash Segment of the Equity Market – A Beginner’s Guide
When I started in the markets around two decades ago, the first thing I learned was trading in the cash segment, also called the equity market or spot market (Cash Market). And trust me, if you’re new, this is the best place to begin your journey.
So, let’s break this down step by step in simple terms.
What is Equity?
Equity simply means ownership in a business. When you put money into a company in exchange for shares, you’re giving the company capital and, in return, you own a part of it.
Example:
If a company is worth ₹100 crore and you own shares worth ₹1 crore, you technically own 1% of that company. This ownership gives you the right to benefit from its growth and share in its profits.
What is a Stock?
A stock (also called a share or equity) represents ownership in a company. When you buy a stock, you are literally buying a small piece of that company.
Example:
If a company has 1 crore shares in total, and you buy 1,000 shares, you own a tiny fraction of that company. This gives you the right to participate in its profits (through dividends) and benefit from its growth (if the stock price goes up).
In simple words, stocks turn you from just a customer of a company into a co-owner.
The Two Main Segments of the Stock Market
When we step into the stock market, there are mainly two ways to trade:
Cash Segment (Equity Market / Spot Market)
You buy shares by paying the full price.
The shares are delivered to your demat account, and you own them.
You can hold them for a day, a week, or even for decades.
Derivatives Segment (Futures & Options Market)
You don’t buy the stock directly. Instead, you trade contracts based on the stock or index.
You can even sell first and buy later (short selling).
Requires margins, not the full value.
It’s riskier and more complex—meant for advanced traders.
Think of it like this:
Cash market = Owning the actual property.
Derivatives = Signing an agreement to buy/sell property later, without owning it today.
For beginners, the cash segment is always the best place to start.
Derivatives Segment (Futures & Options)
You trade contracts, not actual shares.
Allows buying and selling with margins.
Riskier and more complex, generally for advanced traders.
Think of it like this:
Cash = Owning the actual house.
Derivatives = Signing a contract to buy/sell the house later.
What is the Cash Segment?
In the cash segment, you buy and sell shares of companies in real-time. Once you buy the share, it gets credited to your demat account, and you officially become a part-owner of that company.
For example:
If you buy 10 shares of Infosys at ₹1,500 each, you spend ₹15,000.
These shares will sit in your demat account.
If tomorrow Infosys declares a dividend of ₹20 per share, you will get ₹200 credited directly to your bank account.
And if the price rises to ₹1,600, your investment is now worth ₹16,000.
Simple. No expiry dates. No complicated contracts. You own what you buy.
Why is it Called “Cash” Market?
Because here, you pay the full value of the shares upfront in cash (not literally cash, but through your trading account). Unlike futures and options where you can trade with margins, in the cash segment, it’s your money that’s at play.
This is why I always tell beginners – learn cash market first before jumping into derivatives
Trading vs. Investing in Cash Segment
Here’s where most people get confused.
Trading means buying and selling shares quickly – sometimes within the same day, or within a few days/weeks – to capture short-term price movements
Investing means buying shares and holding them for months or years, aiming for long-term wealth creation.
Example:
If you buy HDFC Bank at ₹1,600 today and sell it at ₹1,650 within a week, that’s trading.
If you hold HDFC Bank for 5 years, and it grows to ₹3,200 while also giving dividends, that’s investing.
Both happen in the cash segment. The difference is your time horizon.
Benefits of Trading in Cash Segment
Ownership – You actually hold the company’s shares.
Flexibility – Buy 1 share or 1000, there’s no restriction.
Liquidity – You can sell your shares anytime during market hours (9:15 AM – 3:30 PM, Mon–Fri).
Dividends & Bonuses – As a shareholder, you’re eligible for dividends, rights issues, and bonus shares.
No Expiry Pressure – Unlike futures & options, there’s no contract expiry. You can hold as long as you want.
Risks You Must Be Aware Of
Now, let me share this blunt truth: The stock market is not a money machine. Prices can go up, but they can also go down.
Example:
If you bought Paytm at ₹2,000 during its listing and held it, you saw the price fall to below ₹500 at one point. That’s a 75% erosion of value.
This is why you must:
Do basic research before buying.
Avoid “tips” from random WhatsApp groups.
Start with companies you understand.
My Advice to Beginners
Start small – Don’t put your entire savings on day one. Even buying 2 shares teaches you the process.
Think long-term – If you’re not sure about trading, invest with a 3–5 year horizon.
Avoid margin trading – Brokers will allow you to buy more than your money using margin. Don’t fall into this trap in the beginning. It can amplify losses.
Learn with practice – Markets teach better than any book or course. Track your trades, note down what worked and what didn’t.
Summary
Trading in the cash segment is like learning to walk before you run. It’s the foundation. You’ll understand how markets work, how companies move, and how your emotions react to profits and losses.
When I look back at my 20+ years, every lesson I learned – patience, discipline, and research – all started with those first few trades in the cash market.
So, if you’re starting today, remember:
- Buy what you understand.
- Start small.
- Be patient.
The equity cash segment isn’t just about buying and selling stocks. It’s your first step towards building real ownership and long-term wealth.