Stock market trading - How trading is Performed?
In general, trade is the synonym of a purchase, sell or exchange of good. In stock market, the act of buying or selling shares is called as trading. The same is also called as investing, of course with a good difference between them which will be explained in our next posts. Once after the trading account is allotted to the client, he can buy or sell the shares as per his time and price. Basic parameters required to place an order for a trade are name of the srcip/share, price at which the clients wishes to buy/sell, quantity of shares. Its important to note that it’s not required to buy/sell the shares at the time of placing order. Pre-orders can also be placed which will get execute when the price of the share triggers the order price. The former type of orders are called current market price orders or market to market order where as latter type of orders are known as trigger orders.
CLASSIFICATION OF TRADES:
Based on Action:
Long – First buying and later selling of those shares will be executed
Short – First selling and later buying of shares will be executed
Based on Time Frame:
Intraday – Buy and selling (or) selling and buying to be executed in the same day
short term – Buying the securities and holding for a shorter time period probably around 3 to 6 months
Long term – Buying the stocks and holding for a long term of year or more are said to be long term trades
Based on contract:
Equity – Equity/Cash are simplest trades where any number of shares can be sold or bought with no time limit.
Futures – In futures, only multiples of lot sizes (fixed no. of shares) are permitted to trade which are different for different scrips with time boundary within which one needs to square off their positions.
Options – Same as futures, trading in fixed lot sizes and time limits but with different strike prices and premiums
Based on Companies:
Index Trading – Just like companies, trading can also be executed on index like Nifty, Bank nifty, CNX IT etc
Stock Trading – All other than indices are called stocks/scrips or companies
Note: Detailed explanation of the above 10 classifications are posted in our next articles
Posted on: 2016-05-25 14:02:51 Updated on: 2016-06-10 12:53:46