What are the Major Types of Trade in the Indian Stock Market?

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What are the Major Types of Trade in the Indian Stock Market? 

What is Trading?

Trading refers to the exchange of goods or services between two entities. In stock trading, the exchange occurs between investors or traders and companies issuing stocks. Trade takes place in organised stock markets with rules and regulations that all entities must adhere to. India also has regulatory bodies to supervise and maintain market integrity. 

Regarding stock trading, trade refers to buying and selling listed companies' stocks in primary and secondary markets. Traders must choose one of the different types of trade strategies based on their orientation towards trading, financial goals, and duration for which they want to invest their money.

Types of Trading

Stock traders use different types of trade strategies according to their market knowledge and convictions. One major issue is that one trading strategy that works for one trader may not be successful for another. That is why traders employ different techniques to trade in the stock market. Thanks to advancements in the fintech sector, the stock market has gone through several innovations. Now, worldwide traders have more investment options than ever to pick their preferred type of trading style. 

Here is a list of the key types of trade in the stock market:

  • Intraday Trading

    Intraday trading, also known as day trading, is a common type of stock market trading Although many traders use this strategy to make high profits, it also contains a high element of risk. Traders involved in day trading buy and sell stocks on the same day.

    Since day traders must close the positions on the same day, traders must keep a watch on the momentum of ETF indices, and stocks to place the orders at the right time. They can use the buy first and sell later approach or go for a sell first and buy later strategy. However, novice traders must refrain from trading on margin as it might increase their loss if the trade does not favour them.

  • Positional Trading

    Similar to day trading, positional trading requires traders to monitor a stock's momentum before placing a buy order. However, positional trading does not offer the option to sell first and buy later. It is a medium-term trading strategy for investors ready to focus on long-term gains while ignoring short-term fluctuations.

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    Some traders analyse the stock’s price action to discover their entry and exit points. Support and resistance lines drawn on a chart help them understand the journey of a particular stock. Some traders involved in positional trading also use technical indicators to foresee a particular stock’s future direction. Such indicators include volume, simple average, moving average, MACD, RSI, etc.

  • Swing Trading

    Swing traders analyse charts in various durations, such as 5, 10, 15, 30, 60 minutes or even 24 hours. It helps them spot swings in price fluctuations. Sometimes, they may overlap day or positional trading. Traders often consider this the most challenging type of trade due to high volatility and constant monitoring. However, volatility is a swing trader’s best friend. The more volatility a stock has, the better will be the income opportunities. Hence, if a trader can accurately predict the swing trading this type of trading is the best strategy they need.

  • Long-Term Trading

    Among the different types of trade, long-term trading is the safest strategy. It suits most conservative investors who do not mind buying and holding stocks for years. Long-term traders analyse a stock's growth potential by evaluating balance sheets, reading news, gaining industrial knowledge, and following economic updates.

  • Scalping

    Scalping is a type of day trading. While intraday trading stay invested in the stock market the whole day to identify opportunities for profits, scalping traders create several short-duration traders to leverage the waves. Scalpers need high observation skills and experience to pinpoint trades and place orders. It is common for scalpers to lose a few trades and take a few others. By the day’s end, they compare the profit-making trades with loss-making ones to analyse their loss or profit. A scalping trade might last for just a few minutes to an hour.

  • Momentum Trading

    Momentum trading is one of the easiest types of trade in the stock market. Traders in this trading strategy must predict a stock’s movement to identify the right time to enter or exit. The right time to exit is when a stock is expected to break out. Conversely, the right time to buy a stock is when the price is low.

Conclusion

Every stock trader has different expectations from the money they invest in the market. Therefore, there is no best trading strategy to invest in the stock market. However, remember, success comes to those who identify their trading style to meet their demands. Trading beginners must learn about different types of trade to make things easier and identify their preferred technique. 


Hope you got some ideas from this keep reading & Growing 

Wise investing 


  




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