What is Trading? Definition, Benefits & Drawbacks

• What is Trading? Trading is the process where people buy or sell securities to earn profits from it.
• Trading is way people can make money in a short time duration.
• In this article, we will discuss about what is trading and more about it.
• If are looking to know about trading then you have come to the right place to know. This article will help you to understand about trading.

In this article we will discuss

1. Definition of Trading
2. Differences between Trading and Investment
3. Benefits of Trading
4. Drawbacks of Trading
5. Types of Trading

In this article, we will discuss How to do Trading?

Open a Demat account to buy stocks.

What is Trading? Definition

• Trading is the process to exchange goods and services between two entities. Trading is the way, where you can participate in the financial markets.
• Trading has a financial market risk.
• Trading is the quickest way to earn money.
• In trading, people buy and sell the equities of any company. That is profitable for both the investor and the company as well.
• Trading a risky money earning process.
• The short time investment is called trading.

But trading and investments are different. Let’s know about investment.

Differences between Trading and Investment

Trading and investments are different for their timings. Trading also kind of investment but it is a quicker way and investment is a longer process.

Now let’s know the differences between Trading and Investment.

• Trading is quicker earning method than investment.
• Investment is much safer than trading.
• In trading, traders get their returns within the same trading session or on some days. But investment is a long process, it takes lots of time to get returns.
• Trading is much risky but investment is safe option.
• While trading it needs lots of technical knowledge, where as investment needs technical analysis as well as fundamental analysis, past performance and company’s future growth potential.

Benefits of Trading

Trading is well as a risky option but you can find some benefits of trading.

• It needs a short time to get results.
• Trading can more profitable if it goes right way.
• For the online brokers, trading is now become so easy.
• Traders can easily trade by paying minimum brokerage instead of any physical broker.
• People can control their trade through the online trading platform.
• You can do trade by analyzing the technical analysis of the stock.

Drawbacks of Trading

Besides the benefits trading has some drawbacks in it.

• Trading is highly risky investment option.
• To do the trade, you need to know the technical factors of trading. Because trading needs lots of technical knowledges.
• Many people can’t gather the technical knowledge.
• You can’t trade with a low capital. Trading needs a large scale of money to invest.
• Trading is a quick investment option. So traders don’t have much time and they have to trade within the trading session.

Types of Trading

You have found the answer to what is trading. There are many types of trading. All the trading has their own statics.

• The types of trading are:

1. Day Trading
2. Scalping
3. Swing Trading
4. Momentum Trading
5. Position Trading

Now let’s find out briefly about these trade types.

1. Day Trading

• In this trade, you buy and sell stock on the same day or in the same trading session.
• Hold the stocks for a minute or for an hour.
• Sell off your stocks before closing the market.
• You can earn profits or bear the loss.
• This is a highly risky trade.

2. Scalping

• Here you buy and sell your stocks as similar to a day trade.
• You can execute multiple trades in one day.
• This is a highly risky trade.
• You can earn profits or bear the loss.

3. Swing Trading

• This is a quick trade where you hold your position for over night.
• Swing trading is executed within 1 or 2 days or maybe within a week.
• This trade is safer than the day trading. Because here you will get more time to cover up your position.
• Swing trading is a good option to earn quick profit within short time.

4. Momentum Trading

• This trading depends on the timing of the trade when it is executed.
• You buy a stock and after some time when any news comes, which can affect on the stock price, sell the stock and take your profit from it.
• In this trade, you change your position according to the market situation.
• Momentum trading is a good option for professional traders not for the part time traders.

5. Position Trading

• Position trading is one of the types of trading where you hold the stocks for a long such as for a few weeks or few months.
• You analyze the fundamentals of the company before buy the stock.
• This is very much the safest trade.
• This trade is for those who don’t watch market regularly.

How to do Trading?

• Trading is typical investment option and has a complex process.
• To make it easier many brokers have provided online trading platform.
• You have to open a demat account by just simple process through online.
• Complete the E – kyc process and add funds.
• Then you can trade and buy or sell any stocks.
• The brokers will take a brokerage to complete the process. They are known as discount broker.
  • Thus you can trade online in a very easy manner.

You can read this: Best discount broker with high leverage

Final Words

Trading is a good investment option to earn money regularly. You can earn a good income by trading. Anyone who is over 18 years can trade in the stock market. But it is a risky investment option. Trading has a huge risk factor. You can lose all your invested money if you trade wrong. Also, every one can’t do a trade because it needs lots of technical knowledge and a good amount of capital. So before investing gather trading knowledge properly and take risk as how can afford.

Thank you for reading this article. Hope this helps you to know about trading.

Wish you safe and profitable trading.

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