The stock market brings profits to those who buy and sell securities wisely.
However, not everyone who does this should be called a trader. Moreover, it is not always necessary to own assets to derive monetary gain. Here are the basics of stock trading, an activity that is now accessible online.
What Is Stock Trading
Players engaged in trades on the stock market fall into two distinct categories. Those who keep their assets for short periods are known as traders.
On the other hand, those who hold on to the stock for extended periods qualify as investors. Many of these participants prefer to invest in blue-chip companies to pass their assets to grandchildren.
Therefore, traders are involved in frequent selling and buying of stocks. The source of their profits or losses is price dynamics.
These players aim to capitalize on short-term fluctuations. They may benefit from market changes in the next day, hour, or even minute.
To attract investor capital, companies issue shares that circulate on the global stock market. Buyers of these physical shares become shareholders — i.e., they own a percentage of the business.
Their profit is then derived from dividends or sale of the assets after their value rises. In this conventional scenario, the stock is understood as physical securities. There are two main strategies used.
Active Trading Explained
This is what happens when ten or more trades are executed per month. The focus is on short-term dynamics (spanning weeks or months), which may be determined by changes within the company or fluctuations on the market overall.
Day Trading Explained
This strategy is the most hurried. Traders will open and close their positions within the same day. The approach is based on daily price volatility and looks at changes expected within minutes, hours or days.
Today, a popular choice is the so-called ‘growth stocks’ which may be bought on the NASDAQ exchange. The category includes equity of tech giants like Apple or Facebook as these are viewed as most promising in terms of profit.
The logic is obvious: in our highly digitized reality, global demand for tech products and services is only projected to grow.
However, buying physical shares is not the only way to capitalize on these companies’ performance.
Not only has stock trading gone virtual, but it may also now be done without any actual shares bought or sold.
How to Trade Stocks Online
Some of the brokers providing access to financial markets serve a very special type of traders. These players use CFDs, or Contracts for Difference, on stocks, commodities, and indices. Such an arrangement does not involve actual ownership of any assets. Instead, a trader speculates on the price of stocks, rather than selling or buying physical securities.
Stocks are a profit-generation tool that is also perfect for portfolio diversification.
A wise investor makes sure their assets are varied. This way, losses brought by one instrument may be outweighed by profits elsewhere.
Regulated Online Brokers for Stock Trading in India
Alexandra is a professional writer with an extensive background in the financial markets. Alexandra started out in the financial industry in 2011 and trades forex, stocks, and cryptocurrencies.
Alexandra also writes technical and fundamental market analyses. Alexandra also tests forex brokers’ trading platforms and crypto exchanges and writes forex broker reviews.