Cash trading is one of the types used in stock market by the traders and investors to buy or sell shares. This is a simple way to buy and sell with no time boundary. First thing to note in this kind of trading is that there is no limitation on the number of shares to buy to sell. Traders can buy even a single share without any limitation. Also, once bought, they can sell them whenever required which means traders can turn investors by holding the shares if reasonable/expected price is not in the market. There is no time limit on this, shares can be hold for infinite number of years. There is also no minimum requirement for capital investment.
Next important point in equity trading is that, in derivatives trading, traders can hold long or short positions for more than 1 day whereas in equity trading, short sell tradings are supposed to square off before the market closing on the same day. Traders must not carry forward their short positions in any way, denying which results in penalty around 20% in auction market. In short, in cash trading, long trades are eligible for intraday, short term and long term buy short trades are eligible only for intraday. Apart, these tips are divided into indexes and stocks. As said in our previous article, virtual scrips like nifty, bank nifty, cnx IT ect., are called as index stocks where as companies which exist in real are said to be stock scrips.
From companies point of view, its easy to get listed in equity trading when compared to derivatives segment which requires certain trading volumes consistently. This is the reason there is a vast difference in the number of scrips which are listed only in equity and scrips which are in both segments.
Summary of the article, Cash trading:
Equity trading is eligible for long and short trades.
Short positions must be squared off intraday without fail.
Long positions can be carried over for required number of days.
Margin required to trade in cash trading is high.
No exposure allowed, in case holding for long time as futures.
Companies listed in equity trading are more than that of future segment.
Cash trading is best suitable for short and long term investors.
Posted on: 2016-06-03 11:46:13 Updated on: 2016-06-03 11:49:19