Stock Trading

Stock trading is the process of buying and selling shares of companies on the stock market. People buy stocks to invest and potentially make money as the stock price rises. Stocks represent ownership in a company, and shareholders may receive dividends. Traders aim to buy low and sell high to profit. It involves risks, as stock prices can go up or down based on many factors.

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 stock exchange opened in Amsterdam to trade shares of the Dutch East India Company. In the 19th century, new communication methods like the telegraph made trading faster. Later, in the 20th century, floor traders started working on the exchange floor, shouting orders in crowded areas. Today, with new technology, electronic trading and computer programs have made 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 called micro-trading, is a type of intraday trading where traders make many quick, small trades to profit from tiny price changes. These trades happen over very short periods, sometimes just seconds or minutes. To be successful, traders need to watch the market closely, act quickly, and have a solid plan in place.

Swing Trading

Swing traders aim to profit from short to medium-term price moves by holding positions for a few days to weeks. They typically buy low and sell high, relying on chart patterns and technical analysis to spot potential price swings. The goal is to capture short-term market fluctuations.

Momentum Trading

This strategy involves buying stocks that are trending upwards or selling those trending downwards, based on the belief that the trend will continue. Traders focus on price movements and use technical indicators to time their entries and exits. It's a short-term approach with high activity.

Position Trading

Position traders hold investments for weeks, months, or even years, focusing on long-term trends. They rely on fundamental analysis and market conditions, rather than short-term price movements, and aim to profit from larger market shifts. This strategy requires patience and less frequent trading.

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 orders 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. 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.

Conclusion
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.