Do you wish to enter the dynamic stock trading world? If yes, as a newbie you must know the vast range of opportunities that exist in the Indian stock market. As a beginner, it becomes really essential for you to learn the basics and types of Stock trading that exist in the stock market. You need to grab information on a whole variety of trading styles that you can apply suiting your personality and preferences.
So, before you dive into the deep stock trading arena, it’s really important to educate yourself about the different types of stock trading that are prevalent in India. Analyse your financial goals and decide which trading strategy suits your needs.
Let’s highlight some of the most popular stock trading styles. See and decide for yourself, what kind of stock trader you are?
Types of Trading in Indian Stock Market:
Let’s dig into the different types of stock trading available in the Indian stock market, so you can decide which is best suited for you.
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.
Intraday Trading – Who is it Suitable for?
Intraday Trading is the riskiest of the types of trading. It also requires the highest amount of skill
To trade intraday, one is required to have good technical analysis skills along with proper risk management techniques. Intraday trading is not recommended for absolute beginners who are stepping into the world of trading. With the reduction in the overall margin by SEBI, more capital is required up front to start trading. External factors such as Events, News flow, etc. can also affect prices which makes intraday trading even more challenging.
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.
Swing Trading – Who is it suitable for?
Swing trading is similar to position trading, the only difference is that the position is not open for more than a couple of months. Swing traders trade to get the most from a trend of the underlying. The risk involved is high but not as high as Intraday. One should have sufficient knowledge to identify a trend (Uptrend or Downtrend) and ride alongside in order to generate profits.
BTST (Buy Today Sell Tomorrow) is a form of trading that is nor intraday neither Swing. This technique involves initiating a position in the last hour of the trading session and squaring it off in the first hour of the consecutive day.
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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.
Positional Trading – Who is it suitable for?
Positional trading is a form of trading that requires very little monitoring or adjustment. This is best suited for professionals or people who are not willing to devote too much time to trading yet want decent returns. Positional trading is not very risky as the time period is longer than swing trading. This type of trade is taken, based on the future prospects of any stock or company.
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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.
However, you need to possess an in-depth knowledge of stocks and fairly good researching capability to become a technical trader.
Technical Trading – Who is it suitable for?
Technical trading is similar to Intraday trading, as the skills required to execute such trades are high. One needs to have a thorough understanding of technical analysis and chart reading to perform technical trading. The time-frame required for this type of trading could vary from hours to months. The risk is relatively high in technical trading as pattern breakouts do tend to fail numerous times.
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.
Fundamental Trading – Who is it suitable for?
Fundamental trading is borderline investing, which means that performing fundamental trading is basically investing in a stock. The parameters of fundamental investing is similar to Value investing where an individual buys a shares of a company assuming that it is cheap at that given time and expects it to grow over time. There is no time limit in such trades.
As long as the fundamentals are sound, one might choose to stay invested in that particular trade. The exit criteria for this type is only when the stock seems overvalued or there is some fundamental flaw in the company.
Which type of Stock Trading style is best?
As discussed earlier every type of trading demands a particular set of skills and effort. One who doesn’t know which technique to choose can try their hand in each and every type of technique. In this way, you will find out the perfect fit for yourself.
Types of Trading in India: A Final Take
Now, that you are aware of the various kinds of stock trading methods, you can take a step forward to open your online demat account. Having a demat account is a pre-requisite to invest or trade in stocks. So, you need to have one!
These days it’s quite easy to open an online trading and demat account. Get your KYC done, submit essential documents and here you go! You can get started! If you are a newbie, think of trading and investing small amounts initially and don’t take bigger risks with your hard earned money.
Welcome to the stock trading world! Be alert while taking your first steps in the stock market.
Disclaimer: Stock Trading is subject to high market risks. Please follow due diligence before following any style of stock trading. This post is not an advice to chose any type in particular. This blog is for information purpose only and can’t be constituted as a professional advice in any regard. Fintrakk.com or any of its representatives are not responsible for any losses occurring in Stock Trading.
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Have you decided which stock trading method suits you as per your financial goals? Do you wish to trade in stocks? If yes, just remember stock markets are subject to huge market risks. You may gain higher or you may lose it all. So, you need to be extra cautious while putting your money in stock trading. No matter what type of investor you are, don’t get carried away looking at your friends. Be in control of your emotions and take wise financial decisions.