TYPES OF TRDING
Intraday Trading
Intraday trading, also known as day trading, is a common type of stock market trading. Although many traders use this strategy to make high profits, it also contains a high element of risk. Traders involved in day trading buy and sell stocks on the same day.
Since day traders must close the positions on the same day, traders must keep a watch on the momentum of ETFs, indices, and stocks to place the orders at the right time. They can use the buy first and sell later approach or go for a sell first and buy later strategy. However, novice traders must refrain from trading on margin as it might increase their loss if the trade does not favour them.
Positional Trading
Similar to day trading, positional trading requires traders to monitor a stock's momentum before placing a buy order. However, positional trading does not offer the option to sell first and buy later. It is a medium-term trading strategy for investors ready to focus on long-term gains while ignoring short-term fluctuations.
Recommended Read: What are Share Market?
Some traders analyse the stock’s price action to discover their entry and exit points. Support and resistance lines drawn on a chart help them understand the journey of a particular stock. Some traders involved in positional trading also use technical indicators to foresee a particular stock’s future direction. Such indicators include volume, simple average, moving average, MACD, RSI, etc.
Swing Trading
Swing traders analyse charts in various durations, such as 5, 10, 15, 30, 60 minutes or even 24 hours. It helps them spot swings in price fluctuations. Sometimes, they may overlap day or positional trading. Traders often consider this the most challenging type of trade due to high volatility and constant monitoring. However, volatility is a swing trader’s best friend. The more volatility a stock has, the better will be the income opportunities. Hence, if a trader can accurately predict the swings trading, this type of trading is the best strategy they need.
Long-Term Trading
Among the different types of trade, long-term trading is the safest strategy. It suits most conservative investors who do not mind buying and holding stocks for years. Long-term traders analyse a stock's growth potential by evaluating balance sheets, reading news, gaining industrial knowledge, and following economic updates.
Scalping
Scalping is a type of day trading. While intraday traders stay invested in the stock market the whole day to identify opportunities for profits, scalping traders create several short-duration traders to leverage the waves. Scalpers need high observation skills and experience to pinpoint trades and place orders. It is common for scalpers to lose a few trades and take a few others. By the day’s end, they compare the profit-making trades with loss-making ones to analyse their loss or profit. A scalping trade might last for just a few minutes to an hour.
Momentum Trading
Momentum trading is one of the easiest types of trade in the stock market. Traders in this trading strategy must predict a stock’s movement to identify the right time to enter or exit. The right time to exit is when a stock is expected to break out. Conversely, the right time to buy a stock is when the price is low.
Conclusion
Every stock trader has different expectations from the money they invest in the market. Therefore, there is no best trading strategy to invest in the stock market. However, remember, success comes to those who identify their trading style to meet their demands. Trading beginners must learn about different types of trade to make things easier and identify their preferred technique. With online investing and trading through online platforms like Religare Broking, tradinge in the stock markets has become accessible to a bigger section of investors. For hassle-free stock trading, open a demat account online and start investing.
