What is trading ?
Trading is simply an exchange of goods, assets, or services from one person to another.
Trade started thousands of years ago when merchants sell goods in exchange of food or cloth when there was no money.
If a person wants to buy something he has to trade his raw crops or clothes. After some years money was introduced as a medium for trade and merchants started taking money in exchange of goods.
Types of trading
There are some types of trading outside the stock market also , some of them are -
1. Forex trading -
Forex trading is the trade of foreign currencies.
This type of trade generally occurs between two countries while importing and exporting goods. Between countries, forex trading takes place on a very large scale. But on a small scale a individual can also trade in foreign currencies with small amount.
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2. Commodities Trading
Commodities trading deals in the primary economic sector rather than manufactured products, such as cocoa, fruit, and sugar. Hard commodities are mined, such as gold and oil.
3. Crypto Trading
Crypto trading is simply buying and selling or selling and buying crypto for a very short period like for 5 minutes.
But take note that crypto trading is very risky so you should be very cautious while trading crypto
If you are interested in crypto trading then you can consider opening an account on the world's largest crypto exchange
4. Stock Trading
Stock trading is a trading practice that takes place inside the stock market, there are many different types of stock trading such as -
A. Swing trading -
When you buy and hold a stock for more than a day.
Suppose you buy some stocks of ABC Pvt Ltd. and after 20 days the stock price rises and then you sold that stock.
B. Intraday trading -
When you buy and sell or sell and buy a stock within the same day.
Suppose you buy some shares of ABC Pvt. Ltd. as intraday shares, then you have to sell those shares within the same day in trading hours whether you are in loss or in profit.
C. Options And Features Trading -
The concept of options and features trading is a bit different from all other types of trading.
In this type of trading the trader has to predict the future movement of the complete index such as nifty 50, or any particular stock.
In features trading a trader makes a contract to buy or sell an underlying stock or other asset at a pre-determined price on a specific date
In options trading, a trader has to predict whether the index will go up or down. If the trader thinks index will go up then he/she will buy or sell the call option.
In this type of trading a trader has to buy a minimum of 1 lot of index which is 50 shares in nifty 50 and 25 in bank-nifty, you can do options trading only in these two indexes.
Suppose right now nifty 50 is 17,241.00 so there are two possibilities either this will go up and hit 17300.00 or it will go down and hit 17200.00 and you think that it will go up so you will buy an option of 17300 call (CA) and if the market goes up you will make a profit but if it goes down then you book loss and vice versa.
your money will turn 10 times in a day but you can lose all that you have, so options trading is very volatile and risky but highly rewarding based on my personal experience in options trading.
And options have a weekly expiry every Thursday which means your option value becomes zero after Thursday.
D. Short Selling -
In this type of trading, there is a reverse process of intraday trading, in this trading, you will first sell the stock at a higher price and buy it back at a lower price but on the same day as intraday.
Now you have one question - How can I sell the share which I don't have?
So the answer is - You don't have any shares but your broker has plenty of shares, if you think the market will fall down on that day, you can say to your broker that they can sell the stock on your behalf, then suppose after selling the share, its price decreases you can buy it on a lower price and return it to broker and make profit.
Sell - 100 Rs per share
Buy - 80 Rs per share
Profit -20 Rs per share
But if the market goes up then you have to face loss.
Sell - 100 Rs per share
Buy - 120 Rs per share
Loss - 20 Rs per share
Now you think that why should I buy a share in the loss, but you have to give back the share of broker which they sold on your behalf.