Types of Trading

How many types of Trading are there? Types of Trading

How many types of trading are there: Earning money from trading in the share market is everyone’s dream but before that, you should have complete knowledge about the type of trading. Some traders earn profits of lakhs of rupees by doing intraday trading while some people earn money from options trading.

On the other hand, some people earn thousands of rupees by buying and selling stocks in a few minutes by doing scalping trading. Some traders do derivatives trading and some do positional trading, so what type of trading should we do and how many types of trading are there?

It is very important for you to know the types of trading because if you focus your attention only on one type of trading then only you can be successful in stock trading.

Because if you do all types of trading, then you will not be able to focus well on any one trading style, which can cause you to lose instead of profit.

We all know that trading is a business that involves risk and trading strategy is different in each type of trading, so you must know the type of trading.

Because when you know all the types of trading, then you will easily be able to choose which trading you should do according to your trading psychology.

Today I am going to tell you about the types of trading. Let’s know-

How many types of trading are there?

Types of trading

  • delivery trading
  • intraday trading
  • swing trading
  • futures trading
  • options trading
  • scalping trading
  • margin trading
  • algo trading
  • Muhurta Trading

Delivery Trading

The first type of trading is delivery trading. We also call it long-term trading because in this the shares have to be bought and held for a long time. In this, when the price of the stock goes several times above the price you bought it, then you can earn a profit by selling it.

It is like long-term investing in which your focus is on creating wealth. In this type of trading, stop loss and target are not of much importance.

Through delivery trading, you can invest money in good companies and earn a substantial profit by holding the stock long-term and selling it.

But before doing any type of trading you must have a Demat and trading account. So first of all open your Demat and trading account with a trusted broker. But before that check all the trading charges carefully.

Also Check: Best 5G Technology Stocks To Invest In India

Intraday Trading

Trading done within a day is called intraday trading. We also call this day trading, which is done from the time the stock market opens in the morning till the market closes in the evening.

Stop-loss and target are very important in intraday trading. Because in day trading you have to buy and sell shares in a few minutes.

A 5-minute time frame is considered best for intraday trading. To make a profit from this type of trading, you need to have knowledge of different chart patterns, candles, and technical analysis.

In intraday trading, you also get margin on some stocks through the broker, so that you can trade more stocks with less money, but it has its own advantages and disadvantages.

The risk is high in day trading because you have to buy and sell the stock on the same day and if you forget to buy and sell the stock on the same day, then at the close of the market, your broker will square off all your positions for that day on your behalf. Gives even if you have a heavy loss in them. Also you have to pay some square-off separately.

Keep these things in mind while doing intraday trading;

  • Make sure to set stop loss and target.
  • Trade only on the 5-minute and 15-minute time frame charts.
  • Do not trade with a high margins.
  • Understand trading psychology.
  • Trade in more liquid stocks.
  • Pay attention to support and resistance.
  • Square off all positions before the market closes.
Types of Trading
Types of Trading

Swing Trading

The third type of trading is swing trading. Trading done for one or more days is called swing trading. It can be for 1 week 15 days 1 month or even for a few months.

The risk involved in swing trading is less as compared to intraday trading as you do not have to sell the stock on the same day. But in swing trading also you have to trade on support and resistance only.

In the stadium, you have to select such stocks which keep on going up and down again and again. Shares of Nifty Next 50 companies are considered best for swing trading as they have high liquidity.

Some people do swing trading in nifty 50 companies but let me tell them that nifty fifty’s friends run very well. That is why it is better to choose Nifty next 50 stocks as compared to these, as well as the chances of risk, are very less.

Future Trading

As the name suggests, trading done for the future is called futures trading. It comes under F&O or derivatives trading. In this, you have to enter into an agreement in advance to buy or sell futures of a stock at a specified price at a specified time in the future.

Future trading is a contract in which you have to sell the bought shares before the time expires. The price at which you have bought the shares for your future is called the future price and the time for which you have bought it is called the delivery date.

This is the way of share market trading in which you can start with very little money.

Option Trading

Options trading is also a type of derivatives trading. There are two types of options, call and put. A call option is bought when the market is up and a put option is bought when the market is down.

You can earn profit in option trading in two ways –

  • buying the option
  • by selling the option

Most of the newbies buy options as they can start with very little money while you need more money to sell the option.

In options trading, you can make a profit or loss of lakhs of rupees in a few minutes because the prices of options move up and down very fast. To avoid this, definitely apply stop loss.

To avoid loss in option trading first you must learn the basics of options trading like;

To know more detail about options trading read the post given below-

Also Check: A Journey From The Formation Of The Company To The IPO

Scalping Trading

The practice of buying and selling stocks within minutes or seconds is called scalping trading. Many people do scalp trading in the stock market.

They don’t care about any kind of technical analysis, support resistance, or target stop loss. Their aim is to sell the stock within a few seconds at a very small price rise and make a profit.

In the stock market, many people earn a lot of money in a very short time by scalp trading because these people trade with more quantity. This is very short-term trading.

Most people do scalping trading in call and put options of Nifty and Banknifty in options trading because the liquidity of Intex is the highest, that’s why these people sell all their quantity and earn a lot of profit by seeing the price rise slightly.

For example: Suppose the premium of a call option of a strike price of BankNifty is Rs 200, which keeps on moving up and down very quickly. If the market is bullish today, a scalp trader buys multiple lots of the same bank nifty call option of Rs.200 at once.

One lot in BankNifty is 25 units, so accordingly he will have to invest (25×200) i.e. Rs 5000 to buy one lot.

A scalp trader’s objective is that if the premium of 200 rs becomes 205 rs then I will sell it. He does not wait for a long time and also he trades with more quantity so that he can get maximum profit.

So he buys 100 lots of the same Rs 200 call option on Bank Nifty by investing Rs 5 lakh. Then when the price increases from 200 rs to 205 rs, he sells all his quantity. In this way, he gets a lot of profit.

Let us see how much profit he would have made-

He bought 100 quantity means (100×25) = Total 2500 units were bought

He got a profit of 5 rs on one unit.

Thus profit on 2500 units is 2500×5 = Rs 12500

In scalping trading, he gets this profit in a few seconds or a few minutes because the prices of the options move up and down very fast.

Margin Trading

As the name suggests, trading done with margin money is called margin trading. In margin trading, you can make more profit with less money. But if your guess does not turn out to be correct in this, then your loss can also be huge.

There are as many advantages as there are disadvantages to margin trading. Margin trading can be beneficial for you only if you are sure that a stock will grow from here, otherwise, it is very risky.

Because if your guess is wrong then the broker can empty your bank account.

I strongly believe that you should not do margin trading unless you are well-versed in technical analysis, chart patterns, volume, price action, etc.

Algo Trading

Algo trading is computer-based trading in share market trading. This trading is done with the help of software in which the prices of some stocks are already set for purchase or sale.

You do not need to be involved in this type of trading. All the work is done through software and algorithms. In this type of trading, artificial intelligence and some scripts are used, so that your computer keeps buying and selling the stock by itself.

Muhurat Trading

Muhurta trading is done at a particular or specific time. You must have seen that on the day of Diwali, at any auspicious time, the market is open for a certain time, which is called Muhurta trading.

It is just like normal trading, the only difference is that it is done on the occasion of a particular festival.

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