Creating wealth is an art, they say; the more you improve, the better the outcome. For most of us who believe in the power of continuous short-term gains to earn long-term profitability, trading is an ideal indulgence. We can define trading as nothing but a process to buy stocks or sell them, such as bonds, currencies, derivatives, ETFs, commodities, and other financial instruments to generate profit from short-term price movements in the stock market.
Generally speaking, the major categorization that persists with the trading platforms divides them into two formats, floor trading, and electronic trading. The age-old concept of the accumulation of traders and brokers in the exchange offices is termed an open outcry method as it involves the traders communicating via their brokers and intermediaries to decide on prices and finalize the buying and selling process. Although traders these days hunt for the best trading app to kick start their journey of trading online, open outcry can be considered the pioneer that paved the way for all modern trading techniques.
The latest method doesn’t require a brick-and-mortar trading platform for trade brains to conduct the process. Instead, they prefer to gather in a virtual environment through mobile-based apps or websites for online trading. In this format, human brokers are replaced by these trading platforms designed to enable the trading process.
Users can manage them on their own without the need for human brokers, and they place orders which get saved in the database.
Meanwhile, the algorithm searches for that particular stock throughout the platform and presents the one with the best price option. Any online trading platform requires a demat account opening process to be conducted initially so that the trading transactions are carried out smoothly.
Regarding the types of trading platforms, other categories are assigned depending on the financial gains, risk tolerance levels, and investment duration. There are eight primary types of trading practiced throughout, and let’s have a sneak peek at all of them.
- Day trading, famously known as intraday trading, is commonly opening and closing positions on the same day as traders tend to hold positions for short periods and sell the stocks after a mere fluctuation in the market price. Although it is considered a low-risk mechanism, if the margin money invested by any trader is huge in amount, losses are also massive.
- Swing trading lasts relatively long compared to other short-term trading methods as they range from 5-7 days. Swing traders capitalize on short-term market trends and patterns.
- Positional trading requires a conventional approach of holding on positions for an extended period without being affected by the slightest fluctuation in market prices. This method is also known as the buy-and-hold strategy.
- Fundamental trading: it is more or less like a long-term stock investment because traders dive deep into research to analyze the past performance of the stocks before putting their money in. They also hold positions for a long duration and sell stocks only after a significant price increase.
- Technical trading: it is all about identifying the price trends and market movements using charts and graphs to analyze them.
The online trading process is simplified to a large extent owing to the latest technological advancement. All you have to do is acquire a trading and demat account, a functional device, and a sound internet connection.
