In India, a nation of 138 crore people, there were 1.2 crores of active investors, as of August 2021, according to data from the National Stock Exchange (NSE). Even though this number is increasing and the data is better than before, many people still negatively perceive investing and trading in the stock market.
Trading in India has grown exponentially over the years, especially through the advent of the internet. While it is extremely popular in the United States and the United Kingdom, the Indian subcontinent has also embraced it.
Trading is an exciting and profitable investment strategy. There are several trading instruments, such as stocks, commodities, derivatives, etc.
In this blog, we will see what trading means and the types of trading available in India.
What is Share Market?
The share market is the place operating online where numerous individuals and institutions transact daily to buy or sell listed companies’ shares under the SEBI’s surveillance (Securities and Exchange Board of India).
The Indian share market operates from Monday to Friday. Like a regular market, the timing of the share market is fixed. The normal trading session timing is between 9:00 am to 3:30 pm.
Primary and Secondary Share Market
Companies issue their shares in the primary share market through IPO (Initial Public Offering) for the first time to raise funds from the public. These shares are listed in the secondary market on stock exchanges. Investors can buy or sell them in the market on the stock exchanges. They are involved in investing, trading, hedging, speculation, and other activities in the share market.
Another part of the market is the over-the-counter (OTC) marketplace, where investors trade unlisted shares. It involves direct deals between buyers and sellers rather than making transactions through an exchange.
What is trading?
Trading is buying or selling items using a specific financial instrument, such as stocks, bonds, commodities, currency, etc.
In other words, trading is an activity done to make a profit by buying and selling assets instead of investing.
They do this using trading strategies and techniques. In addition, they also use technical analysis tools and chart patterns.
A person must open Demat account and a trading account before they can begin trading.
However, many people do not know what is trading account? A platform that makes it possible to buy and sell financial instruments is a trading account.
What kinds of trading are there in India?
The main categories of trading techniques are:
Scalping involves buying or selling stocks repeatedly within short periods and is often done using high-frequency trading algorithms.
The average open position held by a scalper is just a few seconds or minutes.
The goal is to place a lot of quick transactions with limited profit margins to cover more contracts with the day’s profits. Liquidity is important for carrying out various kinds of trade.
2. Intraday trading
Intraday trading refers to buying or selling securities based on the price movements throughout the same trading session rather than taking advantage of longer-term trends.
In other words, positions are closed on the same day and are not held overnight. Thus, traders must watch the stock market carefully throughout the day.
3. Momentum trading
In momentum trading, traders attempt to profit from the momentum of the equities in the stock market.
The aim is to sell a stock while its price is rising to receive returns that are higher than normal. Further, the plan is to purchase stock in large quantities when it is trending downwards and then sell it when the price rises.
4. Swing trading
Swing trading makes money by taking advantage of shifts or swings in stock prices or the price of any other financial asset over many days.
Swing traders seek to profit from the additional momentum in stock prices by holding onto equities for longer than a day.
The period is the primary characteristic that sets swing trading apart from other types of trading. Swing traders only hold onto their stocks for a limited time, at most a few weeks.
5. Position trading
The primary emphasis of position traders is long-term price movement, and they want to benefit as much as possible from significant price changes. Trades can typically last for a few weeks, months, or even years.
With a combination of fundamental analysis and technical indicators, traders assess the markets and determine possible entry and exit points.
Experience and expertise are necessary for successful trading. When trading, several aspects need to be considered. You must first assess the risks you are willing to take. Second, you must compare the likelihood of success with the probable repercussions of failure.
Additionally, traders can decide which of the various trading techniques to use based on their financial objectives, stock trading preferences, and the length of time they plan to hold their investments.