The stock market can be simply said as a collection of markets and exchanges where regular activities like buying, selling, and issuance of shares of publicly-held companies occur. The Indian stock call consists of two exchanges for buying and selling; they’re the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Bombay stock exchange is the oldest of two founded in 1875 and latter founded in 1992 and started trading from 1994. As of 2020 there are around 7500 companies listed in total from two exchanges.
All significant firms are listed in both stock exchanges and trading takes place through an open electronic limit order book in which order matching is done with the help of a trading computer.
Here we are going to look at different types of trading that can be done in the Indian stock market so you can easily learn and invest in the stock market.
This is a type of trading that can make you profit in less time only if you are an experienced trader, here trader buys and sells stock on the same day without holding it for the future. Traders can enter into buying stocks any number of times, traders can buy and sell the same stock many times in minutes. Trader sells his stock before the closing time of the stock exchange, so it’s called day trading. This type of trading is mostly considered risky and if you are not an active and experienced trader it’s better to avoid it.
If you are looking to invest money for a long time and want to reap some good return, delivery trading is the way. You have to do detailed research on which stock to invest in which will have large price movement in coming weeks or months. Projections and technical trends of the stock and market are analysed and money is invested. This type of trading is apt for beginners and is also called position trading.
Another trading method where traders don’t hold the share, the trader sells without even holding the share. Here the trader expects the market to be bearish and the stock price will go down so that he can buy at a lower price. By expecting the price to fall, traders short position and recover later in the same trading day. This is best trading practice for those who are experienced traders in the market. This method can simply be said as selling shares at a higher price and then buying at a lower price.
Buy Today Sell Tomorrow
This is a trading practice done by many where they buy stock today in order to sell it the next day when price rises. Due to the T+2 day settlement cycle in India Trader doesn’t get delivery of stocks to your demat account. There is no depository payment charge in this type of trading.
Sell Today Buy Tomorrow
In derivative market traders use a style of short sell a stock and carries forward short sell position to next day and squares it off by buying, trader expects the market to be bearish so that he can sell some limited quantity of shares at high price and then later enter the same stock next day at much lower price. This type of trading is not possible for equity trading.
Traders who want to make quick money, practice this type of trading. Trader buys a minimum lot of assets in initial margin and sells it at a higher price. Buying and selling of securities happen within a single session, Margin is a certain percentage of total traded value determined by SEBI. Margin trading is useful for Futures and Options.
So this all are trading practices followed by traders in the Indian stock market, select one that is suitable for your purpose. If you want to create quick money select the one like Intraday or Margin trading. If you are looking for wealth creation by investing for the future then delivery trading is the best bet.