Stock Market Trading - Types of Trading in Stock Market | Kotak Securities (2024)

Stock trading is a popular way to invest and make capital gains. Every day, stock exchanges welcome millions of traders and investors hoping to make a return on investment. Some are wealthy and prosperous, while others lose their investment. Many traders need to understand what type of trading is best for them to join the stock market. This article covers the various stock market trading tactics to help you choose the right path of action.

Key Highlights

• There are different types of stock trading, such as day, swing, position, etc.

• Each type of trading has a different trading duration, such as short-term trading or long-term trading movements.

• Depending upon your trading goal, you can try any type of trading in the share market.

Meaning of Trading

Trading is essential for the economy because it helps people exchange goods or services for money or other things they need. This happens in places called markets, which can be organised or not organised. Organised markets have rules to ensure everything is fair, while unorganised ones don't. In the stock market, trading means buying and selling company shares listed on the stock exchange. This trading can happen in both the primary market, where new shares are sold, and the secondary market, where existing shares are bought and sold.

History of Trading

Since prehistoric times, communities have traded commodities and services through direct item exchanges or bartering. However, this method had limitations, especially in determining reliable value. Money became a defined unit of measurement, leading to the development of stock trading and credit systems. As joint-stock firms expanded in Europe, stock trading became more significant. These businesses established unofficial stock exchanges and played an essential role in European imperialism. The first online trading exchange, the Bombay Stock Exchange (BSE), was established in Asia and India in 1875. Today, India's main stock market hubs are the BSE and the National Stock Exchange.

Different Types of Stock Trading

Traders utilise a variety of stock trading tactics across the globe, each with its approach and goals. Here are the essential types of stock trading listed below:

1. Day trading

Day trading is also known as Intraday trading. Individuals who aim to invest in day trading typically rely on short-term market movements. The trader closes their trading position before the market closes. The characteristics of successful day trading are proficiency in market concerns, a deep understanding of market volatility, and an accurate feeling of the ups and downs in stock values. As such, it is typically carried out by seasoned traders or investors.

2. Swing trading

Swing trading is a stock market strategy where traders maintain positions for several days or weeks, focusing on short- to medium-term market movements. It involves analysing price patterns and trends to identify entry and exit points, focusing on long-term patterns. Swing trading requires less time investment and less time to complete than day trading, making it accessible to busy schedules.

3. Scalp Trading

Micro-trading, also known as scalping, is considered one of the intraday trading methods. Scalping involves making small profits multiple times within a single market day, ranging from a few to a hundred. However, only some trades result in profit, and traders may lose more money than they gain. Both methods require market knowledge, skills, awareness, and quick decision-making abilities, allowing for more frequent trading.

4. Position trading

Position trading is a strategy where investors hold positions for extended periods, typically weeks to months, to profit from significant market shifts. Unlike day or swing trading, which capitalises on short-term market movements, position traders focus on broader issues and long-term trends. This strategy suits investors seeking to diversify portfolios and capitalise on major market movements without constant monitoring.

5. Fundamental Trading

Fundamental trading is a way of investing where you look at big and small economic factors to see how they affect the value of assets. This means checking out government policies, global events, companies' performance, and financial reports. By doing this, traders can spot good investment chances based on the real strength of the assets. But for investors who take the time to study and wait patiently, fundamental trading can lead to big returns over the long haul.

6. Technical Trading

Technical trading is a strategy that uses past price movements and patterns to predict future outcomes. Traders use charts and patterns to identify support and resistance levels for an asset, deciding when to enter or exit a trade. They use indicators like moving averages and oscillators to make decisions. This approach provides insights into short to medium-term price movements, focusing on the "what" rather than the "why" of market movements.

Conclusion

Stock trading offers many different methods to suit each trader's needs. Traders can choose from various options to handle the complexities of the market, like day trading or position trading. The main goal is always to make intelligent decisions that lead to making returns, whether looking at significant economic issues or past prices. By understanding the different types of stock trading and how they work, traders can navigate the stock market effectively. To make the most of your effort, follow the intraday stock tips and evaluate your risk before trading in the share market.