Types of trading

Here is a guide for you from basics of stock market.So in stock market there are companies with shares, broker and a trader. 

There are 4 different types of trading depending on the time frame of investments they are as below. 

1. Scalping

2. Day trading

3. Swing trading

4. Position trading

1. Scalping-

Buying  a trade and selling it within a short term period around 10 to 15 minutes to gain 2 to 3% gain  is called scalping .A pure scalper should avoid over trading and should stick to the plan and  it demands high level concentration and time. As the saying goes         “if you want to sustainably make more and more money in the market using stock market you will have to learn how to manage your temperament”.

Advantage-

1. Low Risk

2. You can make profit even if the market is slow or stagnant.

3. Gain profit from small capital as it as it will make small regular profit.

Disadvantage-

1. Need high level concentration and time.

2. Need to make quick decision

3. Over trading can result loss of capital.

2. Day trading (intra day trading)-

It is short term (one day max) trading in which a person trades a large volume of trades and closes it at the end of the day. The price change is as a result of demand and supply. Investors can take advantage of small price moves. It is better to start small for beginners as it’s very risky. To gain profit in this a investors must have a disciplined plan. The stock which has heavy price movements for a day is the best stock for intra day trading.

For intra day trading a trader must keep a amount aside that he can risk to invest and research about the stocks and ongoing news about them. Starting 15 to 20 minutes is the most volatile moment in trading. For beginners it’s better to trade during less volatile hours. Using limit orders is a must for intra day trading to stop huge loss.

Advantage

1. Huge profit within short period of time-it gives best return.

2. Trades are closed by the end of the day so it doesn’t affect with a sudden news

Disadvantage

1. Time consuming

2. Risky

3. Swing Trading

Swing traders also called short term trading calls,it need to research a lot about few stocks and trade them for around 5 days to 1 week. They use chart analysis and enter the position at right time. Traders invest money for longer period than intraday traders but shorter period when compared to position traders.

Advantage

1. Less risky as compared to intraday trading

2. Less hectic and no much pressure

3. Less number of trades as compared to intraday trade

Disadvantage

1. It requires huge capital as the as the margin is not available in swing trading

2. It requires huge risk as the morning gap up or gap down position can cause loss

4. Position Trading-

Also known as long term trading (LTCG-long term capital gain)- A person holds for more than one year to gain profit, they use technical and fundamental analysis. They are less concerned about the temporary reverse in the price. Fundamental analysis and technical analysis is important for long term trading. Fundamental analysis is about picking up best stock which can provide high return. Technical analysis is used to identify trends in stocks which will provide great profit. They trade the asset with strong trending potential or the asset which are already trending.

Advantage

1. Doesn’t effect with short term fluctuation in prices

2. Can start with less capital

3. Less time required as compared to intra day

Disadvantage

1. Takes long time to get profit

2. It requires huge risk as an unexpected trend reversals can cause huge loss for the trader