Different types of Trading Strategies

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What is Trading & Different types of Trading Strategies

Trading is an all-time hot topic in the share market. All investors, irrespective of their age, want to be successful traders. Young investors are especially keen to start trading in the share market. They think successful traders make huge profits from Trading. Everybody wants to earn easy and quick money from Trading. Without knowing the trading basics, investors start their trading journey by opening DMAT and Trading AC. Investors think that it is very easy to earn money from Trading. Before starting trading, Investors should know its pros and cons.
Here is this blog, we will try to understand the following.

1. What is Trading? What are the types of trading?

2. Different Types of Trading Strategies

3. Scalping vs Day trading vs Swing trading

What is Trading? what are types of trading
What is Trading? what are types of trading
 

 

In General Terms, Trading is the buying and selling of securities like stocks, bonds, currencies, commodities, and derivatives. Trading can be done by individuals, institutional investors, or financial institutions. Here in this blog, we discuss trading from a stock market perspective.
So, Trading is buying and selling stocks to make a profit. Trading is different from Traditional investing. In investing, stocks are purchased to hold for years and then sold to make a profit and wealth. In Trading, Stocks are purchased and sold frequently. Trading involves buying stocks for a short period and selling them at the right time to earn a profit. In Trading, the maximum holding period of stocks is up to one year. If the stock holding is for more than one year, then it becomes investing and not trading.
There are various types of trading strategies in the stock market. Often, newbies get confused about which strategy to choose for trading. Which one is best for them, “Day trading,” or “Swing trading,” or “Scalp trading”? Before starting trading, Investors should read online and offline literature related to trading. Try to understand different concepts related to trading. Spend a sizable amount of time in the market and then start trading cautiously.

Types of Trading

1. Scalping: -. In Scalp Trading, the Trader has to finish entry and exit in 1 to 5 minutes. Traders quickly earn a profit out of this deal. In scalping, Traders take advantage of small market movements. Scalping is also called quick trading. Traders buy the stocks in quantity and for a short period, say 1 to 5 minutes, on minimum favorable movement of stocks, exit from the stock. This way earns profit. Scalping Trading involves very high risk. Knowledge of Technical Analysis is necessary to capture trends and patterns for quick trade. It is also required to decide on Entry and Exit points. In scalp Trading, traders take the number of Trades to maximize profits.
2. Intraday Trading:-
In Intraday Trading or Day trading, stocks are bought and sold on the same day. In one day, a Trader has to take a position in the market and square it off on the same day. The market opens daily from Monday to Friday between 9.15 am to 3.30 pm. The difficulty level of this trade is very high, as in a day, a Trader has to decide whether to buy and sell stocks. Traders have to use technical and fundamental analysis to find short-term trends and patterns to make trades profitable. 

3. BTST / STBT Trading: The full form of BTST is Buy today and sell tomorrow. If you buy some stock today, hold it for a day, and sell it the next day. It is called a BTST trade.

STBT is exactly the reverse of BTST. The full form of STBT is Sell today and buy tomorrow. This Means Trader will sell it today and he will purchase it tomorrow. In the process, Trader will earn a profit.

4. Swing Trading: Traders make judgments about stock market swings. He tries to identify upward trends. Take the position and hold stock from 2 days to 15 days. Makes the exit when trends are about to finish. Relatively, it is less risky as compared to Day trading. Swing Trader has more time to decide upon entry and exit. Beginners can start their trading journey with Swing trading. It is safer than Scalp and Day Trading.

5. Momentum Trading:- Momentum traders predict the moment of a stock in the market. Traders enter and exit from stock at the right time depending on stock movement. Traders buy stock at a low price at a low level at the beginning of momentum and sell it at a high price when the stock movement is about to break. Understanding of technical charts is a must for this. Momentum Traders do not hold stocks for long periods. They enter and exit in trade in an hour or a day.

5. Positional Trading:-
Positional Traders take the position and hold it between 1 week, 1 month, or up to 1 year. On seeing the right opportunity exists from the stock to earn profit. The longest period in Positional trading is up to 1 Year. If the period is more than 1 year it will become an investment. Traders take the help of technical charts and fundamental analysis to decide at entry and exit points. They try to predict long-term trends and patterns.

6. Future & Option Trading:-  is also one type of short-term trading. It is very popular among investors. It is highly rewarding but involves high risk.  It allows the investor to use leverage. Traders can make a profit by entering into future contracts and using hedging techniques. It is suitable only for experienced and seasoned traders. It requires a deep understanding of Technical Analysis and market conditions. It is for high-risk appetite investors.

Scalping vs day trading vs swing
trading

Scalping

Day Trading

Swing Trading

In Scalp Trading, Trade takes place in seconds and Minutes. The Holding Period is very short

The name itself indicates that traders have to take buy and sell calls in a day.

Swing trade involves stock holding from 2 days to 2 weeks.

In Scalping, Traders take a large number of trades. It can even go up 50 to 100 Earn profit from
them.

There is less trade as compared to scalping.

There are selective and fewer trades involved.

Scalpers use Technical Analysis to capture trends and patterns for quick trade.

Day Traders use Fundamental and Technical Analysis to identify short-term trends and patterns.

Swing Traders use Fundamental and Technical Analysis to identify medium-term trends and patterns.

Scalper makes a quick profit in a
moment or minutes.

Day Traders make a profit in a day.

Swing Traders have to wait for
several days to make a profit.

It can be managed in less capital as traders can use leverage

It can be managed with less capital. Traders can use leverage

More Capital is involved as
securities have to be held for a long time.
 

Conclusion : 

1. Before starting trading, the Investor should spend a sizable amount in the stock market. He should gain knowledge about trading. Understand the risks and rewards related to trading.
2. Investors should understand the basic types of trading. Check his risk appetite and decide on which type of trade is suitable for them.
3. New Bee Traders should start their trading journey with Swing Trading or Positional trading. In both trading, they have got time to take the trade. In Scalp or  Day Trading very little time is available for traders to finish trade. Before doing Future and option Trading, the Investor should spend a sizable amount of time in the stock market.
4. New Bee traders should follow different indexes of the market to judge the market movement. There are various online sites available which will give you different daily, weekly, monthly, or yearly charts. Traders can start using different charts by using Trading views sites.
 

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