What is trading ?
What is trading ?
In trading, Trader buys and sells financial assets to make profit. Trading is done in various financial assets such as stocks, currencies, commodities and bonds. The price of these financial assets keeps fluctuating and trading is done on changes in their price. The main objective of trading is to earn profit in Stock market, not to become the owner of any financial asset. Trading is the complete opposite of long-term investing. The primary goal of trading is to profit from price changes that occur in the short term. While trading, a trader analyzes economic factors and price movements to predict when to trade and when not to trade, so that he can avoid losses and make maximum profit.
Types of trading in stock market
Below are five trading strategies prevalent in the stock market that are explained in detail, which will be helpful in your trading.
1. Day Trading
Day trading involved buying and selling of stocks in same trading day. Typically, the stock market is start at 9:15 AM to 3:30 PM on working day, during which trading takes place. In intraday trading, traders buy and sell shares or securities for a few minutes or hours within the same day and must close their positions before the market closes. Day trading is also known as intraday trading. Profits are earned in day trading by analyzing price fluctuations throughout the day. However, day trading can also result in losses if proper stock market knowledge is not available. In day trading, it is very important to have an understanding of the stock market, market uncertainty and fast decision making, hence only experienced traders can make good profits in it.
2. Swing Trading
In Swing Trading, a trader buys shares and holds them for a few days or a week to capitalize on short-term price changes. They then sell them in the market after generating a significant profit. Swing trading is slightly less risky than day trading. To earn a significant profit in Swing Trading, a thorough knowledge of market trends, chart patterns, and the stock market is essential.
3. Scalping or Micro Trading
In scalping, traders focus on earning small, consistent profits by taking a large number of trades in a short period of time. Scalping Trading, also known as micro trading, is a popular trading strategy in intraday trading (day trading).In scalping or micro trading, traders trade to capture momentum that occurs over a few seconds or minutes and can place bulk trading orders. In micro trading, the main focus is on economic analysis and market trends, leaving aside these factors and only profiting from short-term fluctuations in stock prices. Most often, high-liquidity markets or liquid stocks are best for scalping trading. Scalping is done in stocks, commodities, currencies and index options. The person who trades in this way is called a scalper. Scalping trading uses technical analysis such as volume, support and resistance, indicators (RSI, moving average).
4. Momentum Trading
Most traders do momentum trading because it is a great trading strategy. In momentum trading, traders capitalize on the highs and lows in the prices of securities or stocks in the stock market to generate profits. In momentum trading, traders focus solely on stocks with high momentum, meaning their prices fluctuate rapidly, and have good liquidity and market interest. News and market sentiment play most important role in momentum trading. if you want to generate significant profits in momentum trading, it’s essential to have a strong knowledge of market timing and trend analysis. Traders identify indicators such as RSi, MACD, volume indicators and price action to quickly understand market moments.
5. Position Trading
Here we’ll learn what position trading is and how it works. Position trading is used as a long-term trading strategy. In position trading, stocks are purchased for a minimum period of 1 week to a few months or less than 1 year. Daily market fluctuations or short-term price changes have no effect on position trading. The focus is on long-term market changes, the economy, and business growth, allowing for profit when stock prices rise. Position trading is ideal for those who cannot devote their time to the daily market.
How Trading Works in India ?
In Trading earning profits by buying and selling shares, derivatives, commoditiy and currencies.Two main exchanges for stock trading in India – BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), which are directly linked to SEBI (Securities and Exchange Board of India). if any one want to trade in India, a person must have a trading account, for which there must be a Demat account and a bank account. You can trade in the stock market only through a trading account, i.e., buying and selling. In India, an app is used for Demat account, in which shares are kept electronically. This trading is done easily through SEBI registered brokers using mobile apps or online platforms.
How to Start Trading in India – Proper Guide for Beginners
To make your trading journey easier, we’ll explain the starting steps you should follow to become a profitable trader in India.
Point 1. Basic Understanding of Trading Understanding the basics of the stock market, such as how prices move up and down, what supply and demand are, how to use support and resistance, what indicators are used for, the difference between trading and investing, and technical analysis, all of which will help make your trading easier.
Point 2. Open a Demat and Trading Account Opening a Demat and Trading account with a SEBI-registered broker in India is a top priority, so you can choose the best broker. Documents such as your Aadhaar card, PAN card, and bank details are mandatory to open a Demat and Trading account.
Point 3. Right Learning and Risk Management in Trading To make money in trading, traders should start with equity trading, which allows them to understand the market with minimal risk. With market experience and time, they can also engage in intraday trading, swing trading, and F&O trading with small capital. Trading can only be profitable if they have the right knowledge of the market and follow proper risk management. Risk management plays a key role in trading. Most traders avoid risk management and incur losses. Stop losses should be used.
