Take care if you are a beginner in stock market. As a beginner to stock trading, in order to be able to follow what professional stock market traders are doing then you obviously need to understand why they make the decisions they do.In this tutorial you will find basics of stock market-trader-investor. Detail information about Types of Market, Difference between Trader and Investor, Types of Trading and Investments, Types of Investment.
Stock Trading for Beginners - Type of Markets
Basically there are two types of markets.
1. Primary market
2. Secondary market
Primary Market
A primary market is a place where companies, government and other corporate bodies sell new shares and other financial products which are also called as financial products. In primary market trading is not allowed.
Like any newly listed company sells IPO (initial public offer) then it happens in primary market or whenever any already exiting company goes public then at that time it issues an IPO in primary market.
Secondary market
A market place where actual share trading (buying and selling) takes place is called secondary market.
Majority of share trading in India happens in top two exchanges called NSE and BSE.
Stock Trading for Beginner - Difference between Trader and Investor
Trader
Buying and selling of shares based on technical analysis or market trend taking into consideration very short duration like from a single day to couple of days is called trader.
Mostly trading is done throughout the day and wit is called as day trading or intraday trading.
Trader buys and sells the stock and he is not worried about the company’s performance or how good the company is.
Investor
Buying shares after analyzing the fundamentals of the company and holding them for long term like from couple of months to couple of years is called as Investor.
Investor buys a company only after analyzing its worth.
If the current stock price is available at discount (undervalued) then he buys it for long term prospective.
Stock Trading for Beginners - Types of Trading and Investments
Basically trading and investing are two different methods of earning money in share market.
Types of Trading
Trading is done on stock price for a day or for couple of days.
Trader is not worried about company performance; he is only worried to book profits whenever the share price rises.
Basically there are two types of trading methods
1. Day trading and
2. Swing trading.
1. Day trading
Buying and selling of shares on daily basis is called day trading.
Day trader don’t carry stocks to next day, he square off the positions (shares) on same day.
Mainly there are two types of day traders.
i. Scalp trading
ii. Momentum trading
1. Scalp Trading
A scalp trader buys and sells shares at very low profits (margins) and does multiple trades on daily basis.
2. Momentum trading
A momentum trader identifies the trend and buys shares at bottom and sells at the high of the trend.
He may do one or two trades or at the most three trades in a day.
He may not do as multiple trades as scalp trader on daily basis.
3. Swing Trader
A swing trader is just like a day trader but swing trade may hold the shares (positions) for couple of days like 4 to 5 days, while day trader doesn’t hold shares even for next day.
Swing trader basically trades based on news, breakout and breakdown in technical charts, based on volume surge, based on up and down trade etc.
Stock Trading for Beginners - Types of Investment
Basically there are three types of investment methods.
1. Short term investment
2. Midterm investment
3. Long term investment
Short term investment
Investment done from couple of weeks to couple of months is called short term investment.
It is done based on breaking news, or based on charts of technical analysis.
Midterm Investment
Investments done from couple of months to couple of years is called mid tem investment.
It is done based on analysis of quarterly financial results or based on fundamental analysis.
Long term investment
Investment done from one year to couple of years like 3 years, 5 years, 10 years etc
Long term investment is basically done after thoroughly analyzing the fundamentals of the company and its future growth prospects.
And also the wise investor invests in companies whose current share prices are undervalued but its future growth is huge.
Generally long term investor is worry free from daily markets up and down and share prices volatility.
