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Trading and its types in brief

Trading: Trading is essentially the exchange of goods and services between two entities. It is the basic principle that forms the core of all economic and financial activities or transactions.

Trading is a means through which wealth can be created, a place is dedicated to carrying out these trading activities and it is referred to as a market. Depending on the type of the product, the market is defined, for example, a place where shares/stocks are traded will be referred to as the share market or the stock market.

Primarily there are two kinds of market – Organized and Unorganized.

An organized market is constituted with a set of rules and regulations which every entity operating in the market needs to adhere to and usually consists of a regulatory body to supervise such adherence.

An unorganized market does not contain any strict rules and regulations, and even if it does, adherence is not compulsory.

The stock market is an organized market where a set of rules and regulations are followed and adhered to according to the mandates set by regulatory body SEBI.

As the economy flourished with industries, there was a need for resources, to fulfill the financial resource, a concept of stock exchange started.

The stock exchange was not only used to raise initial capital, it was converted into a financial activity that could cater for a day-to-day trading activity for individuals like Investors, Traders, Arbitrators, Speculators, etc.

Types of trading:

Intraday Trading:

Intraday trading, also called day trading, is the buying and selling of stocks within the same day. In other words, intraday trading means all positions are squared-off or closed before the market closes and there is no change in ownership of shares as a result of the trades as it is just a change of hands just for a day.

Scalping:

Scalping is similar to intraday trading, however the holding time for scalping will be very short, less than a few minutes, multiple orders are traded with small profits. Scalping gives an opportunity to take the advantage of movement with a huge number of shares.

Scalping requires a lot of dedicated screen time, proficiency, trading experience, market knowledge, and the ability to enter and exit quickly.

Swing Trading:

Swing trading is executed to take advantage of the short-term trends or short-term swings or the movement, ideally within a week. Technical analysis plays a vital role to take positions.

Momentum Trading:

In momentum trading a trader takes advantage of huge value movement in the stock, it can either upwards or downwards. A trader tries to look out for a breakout stock or breakdown stock to take advantage of the movement depending on the trend.

Positional Trading:

Positional trading is a technique used to create wealth for the long term for a huge gain and to get the advantage of dividends. Positional trades are executed by the investors who are unable to dedicate a larger time to the market and also by individuals who are not regular participants in the stock market.

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