- editor3
- | Finance - Articles |
- 18 May 2022
- 70,974 Views
- 2 comments
#AD
The stock market is a traditional method of money-making, and there are various methods of stock trading you can choose from. Each of them has its pros and cons. The best and the most profitable trading type will depend on the kind of trader you are. It is up to you to decide which of the following methods would suit your trading instincts and earn you money. Let’s explore the type of trading styles associated with the stock market.
Profitable Trading Methods
The following are widely-accepted methods of trading in the stock market, and different individuals can choose one as per their trading style and risk appetite:
- Delivery trading: Delivery trading is the process of buying and keeping the stocks in your demat account for more than one day. The time of keeping the stocks can vary from two days to two or more years, but you are not allowed to sell them on the same day. The main advantage of this method is that it lets you gain from a stock’s long-term profits and does not require you to book a loss.
- Intraday trading: This trading type makes you buy and sell your stocks on the same day before the market closes. You need to track your market position the entire day, looking for a good opportunity to sell your stocks. Intraday trading is a great method of making fast profits provided you invest in the right stocks.
- Margin trading: Margin trading is mostly useful while trading in futures and options. You are required to buy a set of securities for which an initial margin price needs to be paid to the broker. This margin is a percentage of the total traded portion predetermined by regulations from the Securities & Exchange Board of India (SEBI). This trading type makes use of leverages to multiply profits and losses.
- Short-sell trading: Here, traders simply believe that the market is bearish and act accordingly. You borrow shares from a broker and sell them in the open market. You wait until the price falls enough for you to buy the stocks back at a lower rate. The difference acquired by this process is the profit.
- Buy Today Sell Tomorrow (BTST): This trading type is a modification of the delivery trading style. You buy a stock and decide to sell it the very next day or when you sense an opportunity of profiting. You don’t need to get delivery of your stocks and thus, it saves you the depository participant (DP) charges.
- Sell Today Buy Tomorrow (STBT): This trading type is for the derivatives market, which you expect to be bearish. First, you enter a short-selling position and sell the securities before the market closes. The next day you expect to buy the same securities at a lower rate, thus, squaring off your position.
Matching Trading Methods with Types of Traders
There are mainly two types of traders, namely ‘experienced’ and ‘novice’. Apart from these, there are some short-term traders who play with low or high risk. The listing below is the suitable combination of stock trading styles with different traders for the most profitable returns:
- Experienced: Experienced players take high risks and expert trading strategies generally opt for intraday trading, short selling, and margin trading. Among these, short-sell trading is the most popular trading method for expert traders who have a deep understanding of market fluctuations. It is a matter of practice and expertise to gauge when and where to sell and buy your securities.
- Novice: New and novice players often opt for delivery trading to minimise their risk factors. With the proper guidance of an expert broker, novice traders can also try margin trading techniques to gain substantial profits. These methods offer better risk coverage and require traders to remain patient throughout the process. Long-term trading is best for novice traders as it gives them a second chance to recover from a market dump.
- Quick players: People who want to gain fast and don’t have the patience to stay put in the market mostly opt for the BTST and STBT strategies. Intraday trading is another useful method to gain profits in a day. In most cases, quick players are intermediate traders who don’t have much expertise but end up losing patience when asked to stay put for a long time.
Wrapping Up
Before adopting a particular trading strategy, you must first consider your financial expectations and your risk tolerance. Some of the above trading types are good for making a quick profit, while some can be used to grow wealth. The most profitable method depends upon your trading habits and risk-taking capacity. If you are a beginner in stock trading, do your research and gain knowledge about the best market strategies with ShareKhan.
Tags: Financial Planning, share trading
Kindly Refer to Privacy Policy & Complete Terms of Use and Disclaimer.
Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.
Join us on Whatsapp
GROUP LINKJoin us on Telegram
GROUP LINKDownload our App
More Under Finance
An Exploration of Coin Mixing Techniques: Bitcoin’s ValueShuffle
Unlocking Wealth: The Magic of Sovereign Gold Bonds
Enabling Academic Excellence through Campus Infrastructure Services at GIFT-IFSC
Financial Planning for Women’s
7 Important Factors to Consider Before Buying Customized Checks for Your Business
- « Previous Article
- Next Article »
Certainly, I'm well-versed in the concepts and strategies related to stock market trading discussed in the article you've provided. Here's an overview and further details about the mentioned trading methods and concepts:
Stock Trading Methods:
-
Delivery Trading:
- Buying and holding stocks in a demat account for more than a day.
- Benefits from long-term profits without immediate selling.
- Ideal for investors aiming for long-term growth and less active monitoring.
-
Intraday Trading:
- Buying and selling stocks within the same day before the market closes.
- Requires constant monitoring and quick decision-making.
- Suited for individuals seeking short-term gains based on daily market fluctuations.
-
Margin Trading:
- Involves trading in futures and options with leverage provided by a broker.
- Initial margin payment required, regulated by organizations like SEBI.
- Allows traders to magnify both profits and losses.
-
Short-Sell Trading:
- Borrowing shares to sell in anticipation of a price drop.
- Buying back the stocks at a lower rate to profit from the difference.
- Ideal for traders who speculate on a bearish market trend.
-
Buy Today Sell Tomorrow (BTST):
- Modified delivery trading where stocks are bought and sold the next day.
- Eliminates the need for stock delivery and saves DP charges.
-
Sell Today Buy Tomorrow (STBT):
- Derivative market strategy where traders anticipate a bearish trend.
- Involves short-selling securities first and buying them back at a lower price the following day.
Matching Trading Methods with Types of Traders:
-
Experienced Traders:
- Prefer high-risk strategies like intraday trading, short-selling, and margin trading.
- Expertise in market understanding crucial for success.
-
Novice Traders:
- Opt for delivery trading for lower risk or guidance-driven margin trading.
- Long-term trading suits novices for risk coverage and recovery from market downturns.
-
Quick Players (Intermediate Traders):
- Prefer fast-profit strategies like BTST, STBT, and intraday trading.
- Lack of expertise but seek quick gains without patience.
Wrapping Up:
- Consider Financial Expectations and Risk Tolerance:
- Choosing a trading strategy should align with your financial goals and risk capacity.
- Some methods focus on quick profits while others aim for wealth accumulation.
- Beginner Guidance:
- Novice traders should research and gain knowledge from expert sources or brokers before diving into the market.
This comprehensive understanding of different trading styles and their suitability for various types of traders enables me to provide detailed insights into the dynamics and considerations necessary for successful stock market participation.
