The Indian stock market is a much-discussed topic. It is a vast subject that garners the attention of hundreds and thousands every day. As a newbie in this dynamic market, how do you make the best of your opportunities? You can start by understanding and learning about the market in detail, including the types of market and trading styles.
Types of Markets
The Indian stock market can be divided into two categories: primary and secondary.
What is primary market? The primary market is where shares are issued initially. Therefore it is the main market where the process of listing a firm on the stock exchange for the first time and issuing shares is carried out. Companies and governmental bodies sell new shares, bonds, notes, and bills on the market to raise money for improvements and expansions. The issuer receives most of the revenues, even if an investment bank may determine the shares’ initial price and be compensated for facilitating sales.
The primary market closes when all of the stocks or bonds in the original offering have been sold. Trading on the secondary market then happens.
The secondary market is where regular investors buy and sell existing equities through brokers. The secondary market is in charge of setting stock prices. Typically, we refer to trading at the secondary stock market when discussing investing or doing business at the stock exchange.
Types of Stock Market Trading
Different trading strategies produce different outcomes. Thus, you must first analyze your financial goals to decide which trading style you should adopt. The following are some popular trading styles that you can choose from:
1. Intraday Trading
Intraday trading is also referred to as Day Trading. It is one of the riskiest styles and necessitates excellent technical skills and risk management. This type of trading involves buying and selling the stock on the same day. The stocks may be held for a short period, such as a few minutes, or a more extended period, such as a whole day. The trading is highly volatile, requiring quick decision-making.
2. Swing Trading
Swing traders trade to capitalize on an underlying trend. They aim to capture more price momentum by holding onto equities for longer than one day. Overnight, they attempt to forecast short-term swings. The length of time a stock is held is the main distinction between day traders and swing traders. Although the danger is considerable, it is not as great as intraday. Also, to make money, one has to be knowledgeable enough to spot a trend (uptrend or downtrend) and follow it.
3. Positional Trading
Positional trading is also known as delivery trading. In this practice, the traders buy and hold the stocks for a more extended period – for weeks or even months. The challenge here is to identify stocks having a more significant price movement. And this requires extensive research. It is suited for those who don’t want to invest a lot of time and want decent returns.
4. Short Sell
The short sell strategy is for those that expect the market to be bearish. Here, the traders sell the stocks first and then buy them before the trading session ends. You must square off, meaning selling at a higher price and later buying at a lower price.
5. Buy Today Sell Tomorrow (BTST)
As the name suggests, traders buy a stock and then sell it the next day, anticipating that the prices will go higher. Here you do not receive the delivery of stocks since the market follows a T+2 settlement cycle. Furthermore, you do not need to pay PD charges in BTST trading.
The abovementioned trading styles are a few of the many that traders practice. While some require menial planning, others are high on risk and require constant stock market analysis. Thus, choose the one that best suits your trading and financial goals. Once you decide the same, trading apps will make it easier to trade and earn huge profits.