stock market trading | what is trading | different types of trading | how to start online trading

 

Stock Market Trading

Stock Market Trading

What is Trading in Stock Market?

Trading is basically means buying something and then selling it at an increased price, so that profit can be made. Similarly, buying shares in the stock market and as soon as the price of that share increases, earn profit by selling, it is called trading in stock market.

Some people might think that the same thing happens in investment too. But, it’s not exactly the same. So, now the question arises what is the difference between trading and investing?

In investment, we hold the shares for long time i.e., 1 year, 5 years, or a decade. But in trading, we hold the shares for very short interval of time i.e., 1 minute, 1 hour, or few months. In investment, we carefully buy shares of good companies, because we hold shares of companies for a long time. Whereas in trading, we buy shares by simply looking at the price, without researching a lot about the company, because in trading we only care about the movement of price, and as the price rises, we can earn profit by selling the shares. In investment, it takes long time to earn profit without much risk. While in trading, a huge profit is earned in very less interval of time, with high risk. These are some basic factors, which tells how trading is different from investment in stock market.

History of Trading in Stock Market

History of Trading

Today, trading has existed for as long as human civilization, though the way of trading however has changed a lot. The fist stock market trading was created in Amsterdam, when the Dutch East India Company was the first publicly traded company. To raise capital, the company decided to sell the stock and pay dividends of the shares to the investors. Then in 1611, the Amsterdam stock exchange was created.

In India, the share market arises way back in 1875. The name of the first share trading association in India was “Native Share and Stock Broker’s Association”, which later named as “Bombay Stock Exchange” (BSE) and this association began with 318 members. Then later in 1992, NSE (National Stock Exchange) was incorporated, by the leading Indian financial Institutions. NSE was recognized as a stock exchange by SEBI (Securities and Exchange Board of India, it is a regulatory body for securities and commodity market in India, under the Government of India) in April 1993 and commenced operations in 1994 along with the launch of wholesale debt market, followed shortly after by the launch of the cash market segment.

Types of Trading in Stock Market

Types of Stock Market Trading

There are many different types of trading in the stock market. The top five major types of trading are as follows:

Intraday Trading

Intraday trading is also called as “day-trading. It involves buying and selling of stocks in single day. Traders have to complete the entire transactions in one day. This type of trading is low risk as it is short term and lets the investor to use the margins, where they avail credit from a broker. Since, this type of trading is not for long term, the investor cannot expect high return.

Swing Trading

This type of stock trading is used to maximize on the short-term stock trends and patterns. Swing trading can go for few days, one day to seven days. It allows us to analyze short-term trends to gauge market patterns to execute the transactions. Some traders and investors often consider swing trading the most difficult among the different types of trading in the stock market, as it is a little slow pace process which requires discipline and patience.

Scalp Trading

Scalp trading is basically a subset of intraday trading. Scalp trading includes reaping small profits repeatedly ranging from a dozen to a hundred profits in a single market day. Similar to day trading, scalp trading requires an understanding of technical analysis, market knowledge, and awareness about the price graph. Scalp trading is for very short term, for some seconds to minutes, no overnight positions.

Position Trading

Position trading is a type of trading in which traders gets more time for trading as compared to other types of trading. In fact, a trader can hold the stocks for months. It allows traders to maintain their position, for an extended period and ignore the small movements in market graph. Position trading yields profit when the trade waits for a significant period before selling off.

Momentum Trading

In case of momentum trading, a trader exploits the stocks momentum i.e., the momentum traders try to predict a stock’s momentum to enter or exit at the correct time. Basically, the trader looks for the strips, that are breaking out or will break out. The trader will sell, when the trend is upward and when the trend is downward, trader will buy the stocks at lower price.

How to Start Online Trading

To start online trading, you require a demat and trading account along with a stock broker. Let’s discuss, step by step how to start online stock trading. The four major steps to start online stock trading in India are as follows:

·       Choose a Stockbroker – The first and the most important step is to find a stock broker. They will provide you with the facility to open a demat and trading account. Today, everything is online and you can open your demat account within few minutes by your smart phone or laptop. There are many different kinds stockbrokers and provides different types of benefits and facilities. Some of top stockbrokers are:

Ø Zerodha.

Ø Angle Broking.

Ø HDFC Securities.

Ø Upstox.

Ø Groww.

Ø ShareKhan.

Ø Motilal Oswal.

       And many others...

·       Open demat and trading account – To open a demat and trading account, you need to fill an online account opening form. The form filling process is very easy, you just need to follow the steps shown and you can complete the form filling steps within few minutes. To open a demat and trading account, you require some of basic details and process to follow:

Ø Visit the site or app and go to account opening form link.

Ø Enter your basic details such as name, email Id, PAN card number, DOB, etc.

Ø Provide your address and bank details.

Ø Upload documents related to your identity.

Ø E-sign, self-verification and then, submit.

·       Login to your demat account – The next step is login to your demat account, by using your login Id and password and then, add money from your bank account to your trading account.

·       Start Trading – Now since you have done all the above steps, you can view stock details, analyze it and start buying and selling stocks.

 

Conclusion

Today, Internet has contributed a lot in rising the graph of stock market trading. It has made securities more accessible and convenient to the layman. Online trading has made trading in stock market very simple. The stock market trading has a great impact on the economy. The rise and fall in stock prices affect the economy in different ways. Some of the ways in which the stock market affects the economy of a country are such as on the basis of wealth, stock market falls, influences pension fund, positively impacts the bond market.

If we look at biggest company in the world by market value in 2022. According to Statista, with the market capitalization of 2.64 trillion U.S. dollars as of April 2021, Apple was the world’s largest company in 2022. Apple also led the ranking of world’s most profitable companies in 2020, with the net income of 51.41 billion U.S. dollars.

Statista also provided the fact that, in the fiscal year 2022, the change in stocks in GDP at current prices in India was estimated to be over three trillion Indian rupees, a slight decrease from previous year. Since 2020, an exponential rise in the change in stocks value was recorded.