One engaging method of making money in the financial markets is through earnings on investments made in trades. The availability of several types of trading techniques makes it difficult especially for begginers, which one to pick. In this blog post, we would discuss how many ways in which one can trade in India such as swing trading, intraday trading, futures and options trading as well as long-term trading.
1. Intraday trading
With an intraday trading strategy, a trader buys and sells financial instruments within the same trading day. This type of trading requires quite extensive knowledge of market trends and technical analysis. The idea of an intraday is to capitalize on the volatility of the markets across the trading day.
Pros:
- Great potential profit opportunities
- Can participate in different markets (equity, commodity, currency, etc)
Cons:
- Plagued with high risks due to market volatility however repossesses higher reward
- A necessity to be updated on market trends throughout the day
2. Swing Trading
Swing trading is a trading style where positions are held for more than a day but not longer than a few weeks. The swing traders seek to take advantage of price movements over short to medium timeframes.
Pros:
- Reduces exposure to risks that are associated with intraday trading
- Targets mid term positions towards trending markets
- Familiarity with market trends, as well as technical analysis is of paramount importance
- Advantages:
- Needs a proper insight of market trends and technical analysis
- Overnight risks involved may be there
Futures trading is the trade involving buying or selling of a contract that obligates the buyer to purchase or seller to sell an underlying asset at a predetermined price on a specific date. These are standardized and traded on the exchange.
Advantages:
- High liquidity
- Can earn from the price movement of the underlying asset
Disadvantages:
High risk as a result of leverage and volatility in the market
Intrusive knowledge of futures markets and technical analysis
4. Options Trading
Options trading is the buying or selling of a contract which confers upon the buyer an option, but not a right, to buy or sell an underlying asset at a predetermined price on or before a specified date. The options contracts are standardized and traded on exchanges.
Advantages:
- Ability to take positions in several markets (equity, commodity, currency)
- The ability to capitalize on price moves in the underlying asset
Disadvantages
- Exposed to large risks associated with leverage and market volatility
- Requires adequate knowledge of options markets as well as technical analysis
5. Long-Term Investing
Long-term investing is holding a position for more extended periods; this is several months or years. In long-term investing, a person seeks to benefit from the long-term movement of the underlying asset.
-Lower risk compared to short-term trading
-Opportunity to earn profits from long-term growth trends
Disadvantages:
-Patience and discipline are needed
-May involve opportunity costs since one has to hold a position for a long time.
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