Trading is basically when two groups exchange goods and services. It is the main idea that all economic societies and financial activities are based on.
Trade makes it possible for a society to move forward and create wealth. A market is any place where people buy and sell things. The market is defined by the kinds of products that are sold. For example, the stock market is a place where people buy and sell stocks.
Organized and unorganized markets exist. Organized markets have rules that all businesses must follow. A regulatory body oversees these laws. Unorganized markets don’t have rules, and even if they do, they’re not enforced.
Trading and investing online has made the process much easier, since most markets can be simulated on the internet.
How did trade start?
Trade has been around since the beginning of civilization, around the time of the agricultural revolution. Trading, on the other hand, has looked different in different societies. Mainly because people lived in small groups that were too far apart to work together as one system.
In the past, however, many societies used the barter system to trade services and goods for other services and goods.
But people didn’t like the barter system because there was no easy way to figure out how much something was worth. This problem led to the creation of money, which became the standard by which all goods were valued. This invention led to a series of economic and financial changes, such as the creation of the credit facility and share trading, among other things.
Joint-stock companies started stock trading in Europe, which was crucial to European imperialism. Unofficial stock markets appeared in many European cities. Publicly traded shares began with the Dutch East India Company. It did this through the Amsterdam Stock Exchange.
After joint-stock companies helped the economy grow and spread to new places, they became an important part of the financial world. The Bombay Stock Exchange, which opened in 1875, was the first place in India and Asia where people could trade stocks online.
Also Read: What Exactly Is Mutual Fund?
Trading Types
Share trading are of five main types. This is –
Day trading involves buying and selling stocks in one day. Day traders hold stocks for minutes or hours. This type of trader must close deals before market close. It is used to profit from small stock NAV changes.
Day trading requires knowledge of the market, a deep understanding of how volatile the market is, and a good sense of how stock prices go up and down. So, it is mostly done by investors or traders with a lot of experience.
Scalping is also sometimes called “micro-trading.” Both day trading and scalping are types of intraday trading. Scalping is when you make a series of small profits, anywhere from 12 to 100 in a single market day.
But not every trade makes money, and in some cases a trader’s gross losses might be more than his or her gains. In this case, the holding period of securities is shorter than in day-trading, meaning that people hold stocks for no more than a few minutes.
This feature makes it possible for transactions to happen often. Like day trading, scalping requires knowledge of the market, skill, awareness of how it changes, and quick transactions.
Stock swing trading capitalizes on short-term trends and patterns. Swing trading involves buying a stock and making a profit in one to seven days. Technical analysis helps traders meet their investment goals by identifying stock movement patterns.
Momentum Trading: In momentum trading, a trader takes advantage of a stock’s momentum, which is a big change in its price, either up or down. A trader tries to take advantage of this momentum by figuring out which stocks are breaking out or will break out.
If the stock price is going up, the trader sells the stocks he or she is holding. This gives the trader returns that are higher than average. If the stock price goes down, the trader buys a large number of shares to sell when the price goes up.
Example:
Mr. A owns 7000 shares of S Private Limited, which are each worth Rs. 50. On April 1, 2019, he thinks the NAV of these shares will be going up. On the first day, he decides to sell 3000 shares at Rs. 60 each. After that, he sells the rest of the shares for Rs. 65 each.
So, the total amount he made from the deals is –
Rs. (3000 times 60) + (4000 times 65) – (7000 times 50), or Rs.
Position Trading: Traders who take a position hold on to securities for a long time in order to profit from the long-term potential of stocks rather than from short-term price changes. This type of trade is best for people who aren’t experts in the market or who don’t do it very often.
Effects of Shopping Online?
Stock market trading has gotten a lot better because of the internet. It has made securities easier and more accessible for people who don’t work in the field. Online trading in India makes it easy for anyone to trade on the stock market.
Since online trading began, mutual funds have also become a lot more popular. Individuals can now access MFs and other securities directly online, where there are a huge number of options. Investors can now trade more actively and with more risk, which increases their chances of making money.
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