TYPES OF STOCK TRADING IN INDIA

 

What is Trading?

Trading is essentially the exchange of goods and services between two entities. It is the basic principle which forms the core of all economic societies and financial activities.

Trade governs the wheels of progress in any society and allows for wealth creation. A place where any form of trade takes shape is called a market. Depending on the kind of products, the market is defined. For instance, a place where stock trading takes place is called the stock market.

There are primarily two forms of the market – organised and unorganised. Organised market is constituted with a set of rules and regulations which every entity operating in the market needs to adhere to and usually consists of a regulatory body to supervise such adherence. An unorganised market does not contain any strict rules and regulations, and even if it does, adherence is not mandatory.

1. INTRADAY TRADING:

In intraday trading or day trading, the trader buys or sells the stock on the same day. The day traders book profits or losses quickly and close their trade before the closing hours of the stock market. The stocks can be held for few hours or few seconds and multiple number of times in a single day. Intraday trading is highly volatile and requires fast decision making.

This aggressive style of trading is meant for the active traders who can take quick actions by tracking the stock market movements regularly. Intraday trading is not advisable to beginners due to the high amount of risk associated to it.

2. SWING TRADING:

Swing traders wish to hold stocks for more than one day to capture additional momentum in the price of stocks. They try to predict short term fluctuations overnight. The prime difference between day traders and swing traders is the time frame of holding the stock. Most of the technical traders you might have known come under this category.

3. POSITIONAL TRADING:

In positional trading, the stock holding time period is quite longer stretching over few months to years. Positional traders anticipate big price movements over longer period in expectation of a large gain. Their trading decisions are based on technical as well as fundamental analysis to some extent. So, any minor short term fluctuations are just ignored in this type of stock trading style.

4. TECHNICAL TRADING:

The different trading activities revolve around technical market analysis. Most of the traders utilise their technical analysis skills to determine price variations in Indian stock market. The stock prices are meant to be based upon demand and supply forces. In technical analysis, the view of the market is most crucial in determining stock prices.

5. FUNDAMENTAL TRADING:

In fundamental trading the focus is on company specific events. The fundamentalists are basically long term investors who believe in “buy and hold” strategy. The stock prices are predicted keeping in mind the company, industry and economic statistics. The intrinsic value of shares is determined by carefully analysing financial statements, earnings, growth and the management quality.