Hey, the majority time it happens that you bought a stock on someone’s advice, and wait for months or years to just recover your cost. Trading is a risky game that requires a lot of discipline.
Trading is profitable, and traders make a lot of money through it. On the same token, sometimes they lose money in it. So, whether to go for the activity or not depends on your financial position.
Trading is the exchange of goods, and services between two entities. It is the basic principle which forms the core of all financial activities. There are 2 forms of the market- organized, and unorganized. An organized market is constituted with a set of rules, and regulations. Moreover, consists of a regulatory body for supervision.
Contrary to it, in an unorganized trading market, you are free from all rules, and regulations. Online trading and investing have made the process more convenient where the majority of markets have been simulated on the internet.
5 Types of stock trading
Stock trading has existed for as long as human civilization. However, the form of stock trading for profits has varied across different societies. Here are some common types of stock trading for the profitable outcomes.
- Day Trading- It involves purchasing, and selling stocks in a single day. A trader in such trading is required to close his/her transactions on the same day. Such stock trading for profits is performed by experienced investors, or traders.
- Scalping- Such trading is also known as micro-trading. Day-trading, and scalping, both are the subsets of intra-day trading. Let me break it to you, here the holding period of stocks is shorter than the first one. For instance- individuals hold stock maximum for few minutes. Similar to day-trading for a profitable deal it requires experience, proficiency, and awareness of market fluctuation.
- Swing Trading- It focuses on short-term stock trends, and patterns. Here you can earn gains from your stock within 1 day- 1 week. Traders technically analyze the stock for the proper execution of their investment objectives.
- Momentum Trading- In case of upward momentum, the trader for profit sells their stock. Whereas, in case of downward movement the trader purchases the stock, and waits to sell them till its price increase.
- Position trading- Last but not least. Rather than short-term position trader aims at the long-term potentials of stock. They hold the stocks for months, so this type of trading is not suggested for market professionals.
Stock Trading Tips
No doubt, stock trading is simple but not easy. In trading, the importance of discipline cannot be overstressed.
Imagine- While you are making money, you will surely wait for more. Contrary to it, when prices fall, fear will make you sell your stock fast. However, this can be avoided if you are aware of when to book stock trading for profit/ loss.
Here are some useful tips for all type of stock traders for profit
- Discipline- Stop-loss order is the key to success. Suppose you purchased shares of the company at Rs. 100, and set a stop-loss order at Rs 95. When the price falls to Rs 95 it will be sold, and you have limited your loss to Rs 5. While entering a trade market, it will be a wise decision to be clear about how much loss you are willing to accept.
- Skills- Trading is a skill where what to do is as important as what not to do. It’s essential to get in quickly for profits, and to get out when required.
- Planning- For profits you should identify few stocks, and focus on them.
- Minimum Capital- For a meaningful gain it’s necessary to have sufficient capital to trade. However, remember that this capital should not be borrowed, or a part of your core savings.
- Timings- Look for the most volatile market timing for your client’s.
- Supply-Demand- Stock trading is of no sense if you are unaware of the supply, and demand of individual stocks. If the number of shares for sale is more than one should not buy the stock, and vice-versa.
Finally, you are not supposed to immediately start trading by having a glance at the above tips. The tips are priceless but stock trading for profit requires skills like- ability to understand technical analysis. Remember, stock trading sounds simple but it is not easy.
How much money can be made by trading?
The answer to this question depends on who is trading. There is no limit to profits you can make by stock trading, and vice versa.
Let’s take the example of the Indian Stock Market. It is one of the highest liquidity markets for realizing your dream to earn a huge amount of money. Contrary to it, you can also lose it.
If you are a skilled trader it is possible to earn 1 lakh per day with an investment of 1 Crore. Meanwhile, your stock trading profit in this case is 1%.
How to earn profits from stock trading
- Earning from Dividends- Apart from capital gains, stock traders may expect profits in the form of dividends. A company distributes its profit to the shareholders, and keep the rest for other purposes like expansion.
- Building a diversified portfolio- To focus, and invest all your funds in a specific stock will be a risky deal. For beginners, it’s recommended to stick to large-cap stocks.
- Factors impacting share price- stock trading for profit requires knowledge of various subjects such as finance, economics, and corporate law. Several internal and external factors are responsible for moving the Company’s share price. For instance-
- Acquisition plans
- Buyback offers
- Announcement of bonus
A stock, share, or equity trader is involved in trading equity securities.
If you are a trader with a greater risk appetite than investing in long-term stocks can provide you a higher return on your investment. On the same token, the short-term investment allows you to achieve your financial goals with a lower risk.
By stock trading, you can easily become rich, or lose your money.