Traders use a variety of stock trading strategies to identify and capitalize on the opportunities in the Indian stock market. It is a place or market where the shares traded freely which most traders and investors use to mobilize money. Companies who are listed in the stock exchanges like Nifty and Sensex have their shares traded in the stock market. Once a company is publically listed, any news related to the company affect the price movement of its shares which most individuals (traders) keep a track on especially those who are invested or trading shares of that particular company. In doing so, they use different styles of stock trading which suits them the most.
In this article, we’re going to discuss the different types of stock trading in the Indian stock market. This will not only help you in knowing the types of stock trading but also help you find out which trading style suits your needs and can help you in achieving your financial goals. This trader’s guide aims to provide the vital information needed to know before entering into any trade. Even a beginner investor need to know which trading style suits him/her best and can help in meeting his/her financial goals. So, before you go looking out for intraday trading tips or choose stocks for intraday trading, you need to decide on the types of stock trading. And to decide that you need to go in depth. So, first educate yourself with the trading styles.
Types of Trading in Indian Stock Market
Here we’ve mentioned different types of stock market trading that takes place in India.
Intraday trading or day trading is a type of trading where the traders buy and sell stocks on the same day. The traders who do intraday trading have to enter and exit their trades on the same day, no matter how many times they enter into a stock and hold within the end of the trading session. In simple words, an intraday trader has to close his/her trade before the closing of the market.
Note: Intraday traders do not hold any positions overnight.
Any share bought on that day must be squared off or sold before the closing of the market or it will automatically on that day. The traders who choose this style of trading have a mindset of buying stock not to invest but to trade in order to earn maximum profits as soon as possible. Intraday traders are quite active traders who possess the expert skills of technical analysis and mostly rely on it. Since the stocks bought and sold in the very short duration of time, the large price movement is very uncommon in intraday trading. Thus, the traders focused on small gains.
The benefits of doing day trading are –
- No delivery charges
- The brokerage is low compared to other trading styles
- One doesn’t need to invest big capital and can start trading with less money.
However, there are some downsides such as –
- “Experience” is what most needed to do the intraday trading which is why beginner traders must stay away from intraday trading. One can lose so much in just a few
- Intraday requires constant monitoring of movement in stock prices which made them stay in front of a computer for the long This constant monitoring increases the mental pressure on intraday traders. So, if one has a full-time job then it would be very difficult to plan a trade and manage since it is for a short duration.
Position trading is also known as delivery trading which has entirely opposite time frame from intraday trading. It is the style of stock trading which also known as the “closest thing to the investment”. A trader who is planning to choose the positional trading style can’t solely depend upon technical analysis and need to have knowledge of fundamental analysis as well. Only then a positional trader can make smart decisions in buying and selling of stock. Positional trading generally has a time frame of months to years. Thus, most traders look for weekly and monthly price charts for market evaluation and to get the hint of the direction of the market.
If you have a question: which is better, intraday or positional trading? Then probably compare both against each other.
It is because one who is looking for quick money should do intraday trading but if someone wants assured money over the longer duration of time should choose position trading style.
The benefits of position trading are –
- Like we said before, the positional traders looked for assured money whether it takes a month or a year to do so. Unlike intraday traders, they aim bigger.
- The risk level in position trading is also quite low and a positional trader can easily manage the ups and downs.
But, even positional trading needs experience which certainly not possess in beginner investors. Even then it is the safest trading style compared to intraday and others.
Buy Today Sell Tomorrow (BTST)
As the name suggests, it is a style of trading where a trader buys today and sells tomorrow. With this, a trader can sell the bought shares before getting the delivery of the shares.
Note: The reason for not getting the delivery of shares is because of the stock market in India works on T + 2 settlement cycle.
BTST is different from delivery (position) trading. In delivery shares, the trader gets the delivery of stocks, once you get that, only then you can sell stocks however in BTST trading style, one can buy shares and sell tomorrow without having a delivery. Also, there are no DP charges.
Sell Today Buy Tomorrow (STBT)
STBT is just the opposite of BTST and as the name suggests, it is a trading style where one sells today and buys tomorrow. But, it is not allowed in equity trading and it can only be done in the derivatives market. In this type of trading, the trader enters into a short-sell position and carried his/her short sell position to the next day and squares it off by buying. The trader who implements the STBT trading strategy expects the market to be bearish.
In STBT, a trader sells the asset class future and buys it as the market opens the next day.
Final Thoughts: –
This may not be the complete list of stock trading but we’ve mentioned the important types of stock trading which are quite popular in Indian stock market. If you are a beginner in the stock market, first you must gain adequate knowledge before you start a trade.
And don’t compare one with another. All trading styles are different and unique in their own way. All that matters is, whichever you pick help you meet your financial goals. But, don’t think too much! It takes time and experience to find out the style of trading.
Hope, this article helped you to provide the enough you needed to find the “types of stock trading in Indian stock market”. Nevertheless, if you have any query or would like to add something then don’t forget to mention in the comment section below.