You often hear about trading in the stock market. People earn millions of profits by trading online and many people lose thousands, so what is trading after all, what is the difference between trading and investing in the stock market, What is it like, and whether money can be earned daily from trading. Today you will find answers to all the questions related to trading in this article.
What is Trading?
The meaning of trading is business, if its meaning is understood in detail, then buying an item at a low price and selling it when its price increases so that there can be profit.
In the same way, buying a share or service in the share market and selling it as soon as the price of the share increases and earning profit is called trading in the share market.
Now you must be thinking that the same thing happens in investing but trading is very different from investing.
What is the difference between Trading and Investing?
There is a lot of difference between trading and investment like – In investment, we hold the stock for a long time like – 1 year, 5 years, or 10 years but in trading, we hold the stock for a long time like – 1 minute, 1 hour or few months
In investment, we carefully buy shares of good companies because in the investment we keep the shares for a long time, but in trading, we buy shares without knowing the details of the company because in trading we mean by fluctuations in share price. And as soon as the share price increases, we earn profit by selling the share.
In investment, profit happens after a long time but the possibility of loss is very less whereas in trading we earn profit in a very short time but the possibility of loss is high.
In trading, we buy shares after doing technical analysis, that is, we buy the share keeping in mind the fluctuations in the price of the share, that’s why it is called trading.
In investment, we take fundamental analysis means the complete detail of the company. Whether it will be able to make good profits in future or not, after that we buy shares, so it is called investment.
What are the Types of Trading?
Knowing about trading, the question must have come to your mind how many types of trading are done. Then trading is done in many ways in the stock market, but on the basis of how long you trade in the market, the type of trading is basically divided into four parts.
1. Scalping Trading
2. Intraday Trading
3. Swing Trading
4. Positional Trading
In scalping trading, we buy a share for a few seconds or a few minutes and as soon as the price of the share increases even a little bit, we earn profit by selling that share.
Example – Like you buy the shares of ABC company for ten thousand, whose price is 100 rupees and after 1 minute of buying the share, the price of the share increases from 100 rupees to 105 rupees and by selling it you earn a profit of 500. We will call this scalping trading.
Intraday trading is also called day trading. In this trading, we buy shares and hold them for a few hours and earn a profit by selling the shares bought before the market closes on the same day.
In this type of trading, we hold the purchased stock for a few days and after 1 or 2 weeks sell the share and make a profit.
In positional trading, we buy and hold the shares for a few weeks to a few months and then sell the purchased shares and earn a profit.
What comes in trading?
You must have often heard that trading is done by buying and selling shares in the stock market or stock exchange. But in addition to shares, bonds, mutual funds, commodities, debentures, derivatives, and government securities are also traded on the stock exchange, but there is no need to trade commodities. There is a separate stock exchange.
How is trading done?
To do online trading, you will have to open a trading account. Do you know what a trading account is, if you do not know, then let us talk about trading? Like our bank account, we do money transactions from a bank account. In the same way trading. In this account, we buy and sell shares.
To open a trading account, you will need a broker, just like we go to the bank to open a bank account, but you do not need to go to the broker to open a trading account.
To open a trading account, you can open a trading account by visiting the website of any broker or by downloading their app from the App Store, after opening the account you can trade.
Can I Earn every day by trading?
Money can be earned daily by trading, but it is not easy, if you can earn more money in less time by trading, then you can also lose money in it.
To make a profit from trading, first of all, you will need money because in trading you have to buy more shares to earn good money from the small movement for which you need more money.
Along with money, you should have good knowledge of technical analysis, only then you will be able to understand the pattern of share price and earn good profit by buying and selling shares at the right time.
After learning all this, you have to understand well the use of stop loss to protect against losses. Most importantly, in trading, constantly learn from your mistakes and not give up because every successful trader is successful only when you continuously learn from your mistakes and make your trading even better.