Stock trading is a financial process in which the buying and selling of company shares takes place in the stock market. A stock market is a place where the stocks of the company are sold and bought. Buying a stock or shares means getting an ownership stake in a company; these shares represent a portion of the company’s earnings. Stock trading occurs on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The two key concepts of trading are Traders and Investors:
- Traders: Traders are the people who frequently Buy and Sell stocks for short-term price movements.
- Investors: People who buy stocks for a long period of time aiming for long-term capital growth or dividends.
What are the Types of Stock Trading?
There are Four types of Stock Trading that are:
- Intraday Trading: The Trading in which Buying and selling stocks takes place on the same trading day is called Intraday Trading. It is a short-term capitalization process that ends in a day; positions are closed before the market closes, and no stock is held overnight as the market starts from 9:00 Am to 3:00 pm. There is a high risk in this type of trading due to volatility within a single day.
- Delivery Trading: The stock trading in which the buyer buys the stocks and holds them for a longer period of time, days, months or years. Such type of trading is called delivery trading. It completely depended upon the stock prices and investors’ requirements. The main goal of delivery trading is long-term wealth and capital gain. In this type of trading, when a trader buys the stock, his shares are credited to his demat account, and he has the ownership of the stocks. He can sell his stocks whenever he wants. There is low risk compared to intraday trading.
- Swing Trading: The short-term Trading in which the stocks are held for a few days to weeks according to the trends is called swing trading. Technical analysis of price patterns is the key feature of swing trading. There is medium risk in this type of trading as the positions of the stocks are held for a longer period than in intraday trading.
- Positional trading: holding stocks for several weeks or months and selling them after months is called positional trading. By doing such type of trading, the traders get longer-term trends in stock price. The risk level is medium to high according to the stock and market conditions.
Which Stock Trading is Best for Low Risk and High Profit?
Long-term investment, also called delivery trading, is preferred by investors for low risk. To have low risk and high profit, investors need to invest in high-quality and well-established companies that have strong financial and growth prospects. The risk is low in long-term trading, but the prices of the stock can still fall due to market downturns. However, the impact would be lower because of long-term holdings.
Advantages of Investing Long Term:
- Less exposure to daily market trends.
- Lower transaction costs as the stocks are eventually bought.
- Capital appreciation and dividends.