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STOCK TRADING and ITS TYPES

STOCK TRADING and ITS TYPES

Stock Trading 

Buying and selling of stocks is called stock trading. Mainly there are two ways of doing stock trading.

  • Online Stock Trading.
  • Offline Stock Trading.

Online Stock Trading

  •  Doing stock trading with help of computer, internet connection and with trading/demat account is called Online Stock Trading.
  • If you would like to do online stock trading then you should have a computer, internet connection and online trading account.

Offline Stock Trading

  • Doing stock trading with the help of broker or through phone is called Offline trading. In other words trading will be done by another person on your behalf based on the instructions given by you, and then the other person can be a broker.
  • The broker will do buying and selling of stocks on your behalf depending on the instructions given by you. If you want to do offline stock trading then you need to open the demat account.

Different methods of buying/selling of stocks

Following are the types of orders which are used for buying and selling of stocks.

Market Order

  • When you put buy or sell price at market rate then the price gets executed at the current rate of market. The market order gets immediately executed at the current available price.
  • In market order there is no need to mention the price; the stocks will get executed at the best current available price.
  • If you wish to buy or sell stocks at any specific price and market order is not suitable for you then you have to go for limit order.  STOCK TRADING and ITS TYPES
  • Market order is for those who want to buy or sell immediately at the current available price.

Limit Order

  •  Its totally different than market order. In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then your order will get executed with the mentioned price by you. But here it’s not sure that the price will come to your limit order.
  • In day trading its risky because you have to close all your transactions before 3:30 PM and if in case the price doesn’t reach your limit order then your order will be open and then you have to go through (bare) the heavy penalties. Importantly limit order and stop loss trigger price are used together.

Stop Loss Trigger Price

  • Stop loss and trigger price are used to reduce the losses.
  • This is a very important term especially if you are doing day trading (intraday). Stop Loss, as the name indicates, is used to reduce the loss.  STOCK TRADING and ITS TYPES

DIFFERENT TYPES OF STOCK TRADING

Day trading and Delivery trading are the two main types of stocks trading.

Day trading  

  • Buying and selling of stocks on daily basis is called day trading, also called as intraday trading.
  • Whatever you buy today you have to sell it today OR whatever you sell today you have to buy it today and very importantly during market hours that is 9.55 am to 3.30 pm (Indian time).

Delivery Trading

  • In Delivery Trading, as the name says, you have to take the delivery of stocks and after getting these stocks in your demat account you can sell them at anytime (or you can hold them till you want, there is no restriction).
  • In delivery trading you need to have the amount required to buy stock for example, if you want to buy 100 stocks of Reliance at price 500 than you must have (100*500) Rs. 50000 in your account; once you purchase these stocks they will get deposited in your demat account (say after basically, trading day and 2 additional days).  STOCK TRADING and ITS TYPES
  • Then you can sell these stocks when the price of these stocks goes up or else you can sell whenever you want. Please Note – First you have to buy and sell. You can’t sell before buying in delivery trading while its possible in day trading.

What is Online Stock Trading? Trading with the help of computer having internet connection and online trading account is called Online Stock Trading. Basically people use online stock trading who want to trade themselves.

Investment in Short term, Mid-term and Long term trading

Short-term Trading — Stock trading done from one week to couple of months is called short term. Companies or sectors having some breaking news will be used for short term trading.

Mid-term Trading — Stock trading done from one month to couple of months, say six to eight months is called midterm trading. Companies’ announcements of quarterly results or some big foreign acquisitions will be used for midterm trading.

Long-term Trading — Stock trading done form couple of months to couple of years is called long term trading. Companies whose fundamentals are good and have good future plans then the stocks of these companies are used for long term trading. Generally traders having good capital go for long term trading. STOCK TRADING and ITS TYPES

 

 ALSO READ : https://www.brainyias.com/types-of-financial-market/

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