Stock Trading

Trading involves the exchange of goods and services between two parties. In the case of stock trading, it is an exchange of stocks of different companies between traders/investors. Stock trading takes place in the stock market using a trading account. You can open a trading and demat account with a broker registered with SEBI. This allows you to trade and invest online in the stock market along with other investors. Let us read more on ‘what is trading?’, trading stocks, the history of trading, types of trading, how trading works in India, ‘What are the assets and markets you can trade?’, and share trading time in India. trading vs investing, and online trading in India in detail.

History of stock trading

In 1611, the first modern exchange opened in Amsterdam for trading Dutch East India Company shares. In the 19^th century, communication advancements like telegraphs accelerated trading. Later, in the 20^th century, the rise of floor traders came into existence which took place by shouting orders in busy pits. With technological advancement, electronic trading and algorithms are leading the market by making trading faster and more global.

In the context of India, the Bombay Stock Exchange (BSE) grew over time to become one of the largest exchanges in the world. Later, we saw the rise of the National Stock Exchange to facilitate a digital trading platform for investors. These two stock changes are highly regulated by the Securities Exchange Board of India (SEBI) protecting the rights of investors.

Types of stock trading

Day Trading

Day trading involves buying and selling financial instruments within the same trading day from 9:15 am to 3:30 pm on a weekday (barring stock market holidays). The main aim of traders is to gain profit from short-term price movements, exploiting volatility in the market. As a day trader, you need to closely monitor charts, technical indicators, and news events to seek quick intraday trade opportunities.

Scalping

Scalping, also known as micro-trading. Both scalping and day trading are subsets of intraday trading. It involves trades who want to make quick, small trades, aiming to make a profit from minuscule price fluctuations over short timeframes (mere seconds or even minutes). It requires traders to have keen observation with lightning-fast execution and a well-structured trading plan.

Swing Trading

Swing trading follows a slightly longer-term approach of ideally one to seven days. Traders focus on capitalizing on medium-term price trends and patterns. Swing traders are required to employ technical analysis to identify potential entry and exit points.

Momentum Trading

Momentum Trading focuses on assets that exhibited strong recent performance. Traders believe that trends in financial assets will continue and try to take advantage of the momentum of profit. They identify assets with upward or downward prices and buy or sell accordingly, hoping to make a profit from big price changes.

Position Trading

Position trading focuses on a slow, long-term approach with trades lasting months or even years. Traders rely on the underlying value of the asset, using fundamental analysis to determine if it’s undervalued. Position traders aim to buy these assets and hold them until the price rises to perceived fair value.

Futures and Commodities Trading

Future and commodities trading entails buying and selling standardized contracts for the future delivery of commodities or financial assets. In this domain, traders predict the future price of things like oil, gold, or agricultural products. It is used for both protecting against price change (hedging) and for making profits by betting on price movements (speculation), providing access to many different markets.

Algorithmic Trading

Algorithmic Trading involves computer programs to make numerous trades quickly. The program can analyze large amounts of data in real time, spot trading opportunities, and place order with precision. To automate trading strategies and achieve efficiency, hedge funds and institutional investors often use algorithmic trading.

How does stock trading work in India?

National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are two stock exchanges in India where companies can list their shares. To get listed, companies need to apply for IPO (initial public offerings) in the primary market to raise funds. Once the IPO is completed, all the shares of the company are listed in the secondary market where the investors can buy and sell existing shares of the company. In order to trade in the secondary market, investors are required to open a Demat account with a SEBI-registered broker.

What are the assets and markets you can trade?

 Below are the types of assets and markets that you can trade: 

• Shares:  You can buy and sell shares of the listed companies depending on the price and again profit.
• IPOs (Initial Public Offerings):  Companies issue shares for the first time in the primary market to raise capital.
• Bonds: Bonds are a more secure type of investment which includes debt securities issued by governments and corporations. You can gain income from the interest payment.
• Commodities: trading commodities include raw materials and primary agriculture products, including energy resources, metals, and agricultural goods.
• Indices: Indices help you predict the overall performance of a group of companies or markets.
• Forex: Forex allows you to trade currency pairs against the relatively stronger currency to make a profit.
• ETFs (Exchange-traded funds): they involve investing in funds that hold a collection of assets like bonds, stocks, or commodities.

Share Trading Time in India

 Stock Trading vs Investing

Online Stock Trading in India

Trading online has helped numerous traders across the globe, especially in India. With the help of the internet, traders can participate in trading from their mobile phones or laptops. To do this, you must have a Demat account to perform trading involving selling and buying of shares and other securities in digital format. Also, you can open a Demat account only with a SEBI-registered broker.

End Note
Stock trading offers a unique experience for traders depending on their investment strategies. While investing it is important to understand the basics of trading along with the factors that impact the invested stocks. If you are a new investor or looking to invest, it is always advised to get help from an expert. blinkX by JM Financial is a perfect option for you to open your trading account and trade from anywhere.