What is Stock Trading in India? 7 Best Types of Stock Trading

INTRODUCTION

What is stock trading in India? Well, stock trading is the buying and selling of the stocks of the companies that are publicly traded. It is a very popular form of stable investment that can give you high returns. The one who holds the stocks for a longer period is an “investor”. And the one who is trading regularly is a “trader”. Stock trading in India focuses on buying at low and selling at high to make better returns.

You can not predict ‌the prices of stocks so one needs to have great knowledge of stock trading in India and the companies you are planning to invest in. Stock prices can be influenced by a lot of factors such as demand and supply, economic factors, company performance, and many more so one should have a proper hold on all the key points before starting stock trading in India.

What are the types of stock trading?

There are different types of stock trading in India that include different risks and profits but the most important thing is to select a strategy based on the financial goals, risk appetite and other factors:-

TYPES OF STOCK TRADING IN INDIA:-

There are several types of stock trading in India that investors can participate in. Here are some of the most popular types:

1. Intraday trading

Intraday trading can also be called ‌day trading because it involves the buying and selling of stocks within the same trading day. The main motive of intra-trading is to take advantage of the smaller price movements. The traders who do intraday trading, need to be quick and disciplined in decision-making because they need to make decisions in a very short period of time.

2. Swing trading

Swing trading is the type of trading in which the stocks are held for a few days to weeks. The main criterion is to have a command on short-term price movements. Generally, swing traders use technical and fundamental analysis ‌to identify trends. Swing traders aim to maximise profits while minimising their exposure to market volatility by capturing these swings.

3. Positional trading

People who practice positional trading hold stocks for the extended period of time. Unlike day traders who open and close their positions within a single trading day. Positional traders have a longer-term perspective and are willing to tolerate market swings in the short term. The aim of positional traders is to capture major price moves and to take advantage of long term market trends.

4. Value investing

In this strategy the undervalued assets are bought and sold when their intrinsic value is recovered. Stocks are held by traders for a longer time while they wait for the market to recognize their true value. They accept that these underestimated resources can possibly give prevalent returns over the long haul as the market rectifies the mispricing. This kind of investing necessitates in-depth research and valuable abilities.

5. Growth investing

Growth investing is a type of investing that focuses on investing in businesses with significant growth potential. Investors typically target businesses with significant disruption or rapid expansion potential. These businesses frequently prioritise reinvesting their earnings into the business in order to drive further expansion rather than paying dividends to shareholders.

6. Futures & Options trading

The purchase and sale of standardised contracts are known as futures contracts, which obligate the buyer to purchase or sell an underlying asset at a predetermined price and date in the future, and is referred to as “futures trading.“
Moreover, options trading ‌generally involves risks, as managing risk and reward isn’t easy in options trading. Options give a holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (known as the strike price) within a specific period of time. Investors can hedge against potential price risks or speculate on price movements through futures and options trading. Also, investors analyse the present data to predict ‌the future price momentum in futures and options trading.

7. Algorithmic trading

Using ‌computer programs for buying and selling ‌stocks is known as algorithmic trading. Generally institutional traders use these types of trading to get the fastest short term returns from the market. Algo trading is useful for the people who want to execute their orders faster than others and to get out of the trade quickly. Algorithmic trading is the systematic and disciplined type of trading and can give maximum returns.

ADVANTAGES OF STOCK TRADING IN INDIA

1. Better returns:

Stock trading in India can give you potentially high returns over the long term. You must identify the fundamentals of the company in order to generate the returns. Stocks can give you incredible outcomes if you know how to manage them properly.

2. Diversification

Diversification is the major step investors take so that they can minimise their overall risk. By diversifying your portfolio you can split your investments into the companies of multiple sectors which will create several options for the returns.

3. Liquidity

Diversification is the major step investors take so that they can minimise their overall risk. By diversifying your portfolio you can split your investments into the companies of multiple sectors which will create several options for the returns.

4. Regular income

Stocks are a steady source of income also. Some stocks receive dividends at regular intervals to ‌shareholders so it is a flexible source that can generate regular income.

5. Convenience

Stock trading in India can be done in a very convenient manner as you can do all the things by a single application. You can open a DEMAT account online and can start trading after a few simple steps. There are a lot of tutorials available online that can help you learn stock trading.

6. Market insight

You opt for a lot of information about the economy of the country and the companies you are invested in or planning to invest in. This will give you insights into the market depth. Information about the market will help you make informed decisions.

7. Reasonable prices

Stock trading in India has become more practical lately with the presentation of minimal expense and online business administrations. Regardless of the size of your investment, this makes it simpler for you to participate in stock trading and invest in the stock market.

8. Exposure to the global market

Stock trading in India gives you exposure to investing in a global market also so you can invest in different companies around the globe and make your returns double.

9. Flexibility

Investing in the stock market can give you the flexibility of investing as you can start your investment with the minimum amount also. Gradually, you can make your portfolio stronger but yes for the initial time you can invest with minimum capital.

Also Read: How to Start Trading?

What are the points one need to focus in stock trading?

1. Knowledge:

One needs to have proper knowledge of technical analysis because without knowledge, one can not trade and get profits.

2. Patience:

An investor needs to have the patience to overcome market volatility.

3. Diversified portfolio

By diversifying your portfolio one can ‌observe fewer risks and more returns because your investments are diversified. Your investments are segregated into different companies.

4. Risk management:

One who wants to start stock trading in India must learn about risk management before entering any trade.

CONCLUSION

In the Indian economy stock trading has a very important role and it is considered as one of the most crucial parts of it because when investors take part in stock trading and make investments, it somehow contributes to the growth of the company and the overall economy of the country. To become a trader and initiate stock trading in India it is very important to continuously learn and stay updated to create better opportunities for yourself. By creating the best strategy you can manage your investment goals. So, start your trading career now and start gaining knowledge about technical analysis and fundamental analysis.

To learn more about Technical analysis, you can join our free course :- TRADING IN THE ZONE – ELEMENTARY

To know more about stock trading in India and the courses available, Do read our blog :- How to learn Stock Trading