Stock trading refers to buying and selling stocks in order to make money by capitalizing the short-term market events. A trader is required to analyze market trends on a continuous basis and make the trades at opportune times to make decent profits. It is understood that the stock market involves a lot of risks but when a trader approaches the share market in a disciplined manner, it can be proved as one of the most efficient ways to build wealth.
There are different types of trading styles. The right one for you depends on the financial objectives that you want to achieve through stock trading.
Before choosing a type of trading, you should know each type in-depth so that you can choose the right type of style for yourself. Let us discuss each of these trading styles.
Types of Trading in the Stock Market
1. Delivery Trading/Position trading:
This trading style suits the one who wants to invest in the long-term. They intend to buy and hold their securities for weeks or even months. Here, a trader needs to research enough and identify a stock that might be undervalued, or which might have growth potential in the longer run. In this trading style, traders buy a stock and hold it for weeks, months or years before selling. Beginners can go with this trading style.
2. Intraday Trading:
In Intraday trading, a person buys and sells the stocks on the same day before the market closes. Here, traders can hold the position for a few seconds or for a few hours. But it is mandatory to close the trades before ending the trading session. Otherwise, it will be closed automatically which may result in unprecedented losses. This style should be adopted by experienced traders only. It is also known as day trading. High brokerage cost is a concern for day traders. They need to find a Demat account with a low brokerage in order to cut costs.
3. Swing Trading
This style of online share trading is based on short-term market trends. Traders can hold stocks ideally for one to seven days and then sell them to make profits. Traders need to analyze stocks technically to identify the stock movement patterns. Technically analysis is the task of experienced traders.
4. Short Selling
Traders are allowed to sell stocks even without holding them. You can understand it as sell first and buy later but within a trading session. Whenever traders expect that the stock’s price will fall, they enter a short position and take advantage by selling the stocks that they do not hold at the moment. The clear concept is that sell shares at a high price and buy it back at a low price. This kind of trading style is most preferred by experienced traders as they are much familiar with the market pattern.
5. Momentum Trading:
Momentum trading is all about exploiting a considerable value movement of stock.
When it is upward momentum, traders sell the stocks to make higher profits than averages. And when it is downward movement, traders buy a sizeable volume of stocks and sell when its price goes up. Experienced traders need to identify the stocks that are about to break out so that they can capitalize on their momentums.
6. Margin trading:
This style is famous for future and options trading. A trader needs to pay only a part (margin) of the total traded value and the rest is funded by the stockbroker. Traders need not pay the total amount in one go.
7. Fundamental Trading:
Fundamental trading is completely based on fundamental analysis. Traders examine financial reports of different companies and anticipate their growth rate. If they find it significant, they can invest their funds in the particular company’s shares and hold them for a period as per their wish. Beginners can try this trading style for online share trading.
In the above read, you have understood that trading opportunities are associated with technical analysis. Traders are required to work on their skills to read pattern charts of stocks and historical patterns of trading behaviors as well. Different trading styles require different strategists and sophisticated trading models.