[10 POINTS] What is Trading? How to Make Money in Stock Market from Trading?

Buying and selling shares on the stock market on the same day is known as trading. Intraday traders utilize technical indicators, chart monitoring, and momentum strategies to make the most of their trading.

At the end of the trading day, traders squared off their positions. It necessitates more frequent and close monitoring of the financial markets than if you were investing for the long run.

✅ How much can you earn by Trading?

There is no upper limit to how much money you may make from stocks in a month. Trading may earn you hundreds, lakhs, or even millions of dollars. Several significant factors influence intraday profits:

• How much cash do you invest in the markets daily?
• How much risk are you willing to accept with your bets?
• Trading competence and technical indicator knowledge
• Patience

Depending on your skill to assess intraday data, you may be able to double or even half your money with a single deal. You might be wondering how much money you can make in the stock market. It may go up to Rs 1 lakh per month or even more if you are skilled enough and have a plan in place. Does this imply that all intraday traders are profitable? Not. According to certain statistics, 95 percent of Indian traders lose money in the markets. That is a big number of merchants. As a result, to simply break even, much alone record gains, one must be thoroughly educated on intraday trading and the many tactics involved.

✅ Points to note when trading

1 Stop Loss

Stop-loss is a trading technique that helps you to limit your losses when trading in the stock market.

When you set a stop loss criterion for your stock at a specific price, it is automatically sold when the price goes below the stop-loss price level.

For example, suppose you purchased shares of business X at Rs 300 per share and set a stop-loss order at Rs 260. As a result, if the price falls to Rs 260, your shares will be immediately sold, decreasing your loss to Rs 40 per share.

2 Through Background Research

Intraday trading requires extensive research. Making rapid money, which is exactly what intraday trading provides, must be accompanied by extensive research of the company.

Traders must be knowledgeable with charts, synthesizers, trading metrics, ratios, monitoring volume, and other indicators that need training. Stock market returns are erratic, especially when you purchase and sell on the same day. As a result, extensive research and skill development are necessary.

3 Regularly monitor your Investment

One of the most important qualities to be successful in the stock market is to monitor your investments or portfolio regularly.

Monitoring your portfolio regularly helps you to sell your stocks immediately if you think the prices are likely to correct in the future. This is even more important in intraday trading. This is because your daily activities may influence your market position (profit/loss) and financial circumstances.

You may also make a lot of money by selling your stocks when they are at their peak price, but you must go back and watch your portfolio in real-time to know when it is the ideal moment to do so.

4 Patience

The most basic requirement for making money from high-return stocks is patience. Any actions made on a whim might cost you a lot of money. Especially dealing with significant sums of money.

5 Avoid herd Mentality

One of the most terrible mistakes in the stock market is buying or selling just because everyone else is. As an investor/trader, you must recognize that your financial objectives are not the same as those of another individual.

It, whether you purchase or sell a stock, you should do so based on your study. In other words, you may purchase or sell a stock because the time is perfect, the company’s fundamentals have changed, or certain regulatory developments may affect your position. Above all, you should only purchase or sell stocks if you have the financial means to do so.

✅ Types of Trading

Primarily there are five types of Share Trading. These are

1 Day Trading

This type of trading includes buying and selling equities on the same day. Individuals that trade stocks during the day do it for a few minutes or hours. A trader engaging in such trade must complete his or her transactions before the market closes for the day. It is popular for profiting from small-scale variations in stock NAV.

Day trading necessitates market knowledge, complete awareness of market volatility, and a sharp feel of the ups and downs in stock prices. As a result, it is generally carried out by experienced investors or traders.

2 Scalping

It is also known as micro-trading. Day trading and scalping are both subcategories of intraday trading. Scalping involves reaping modest earnings frequently, with rewards ranging from a dozen to a hundred in a single market day.

However, not every transaction results in profits, and in certain situations, a trader’s total losses may surpass his or her winnings. In this situation, the holding duration of assets is shorter than in day trading, with people holding equities for a maximum of a few minutes.

This feature allows for the frequency of transactions. Scalping, like day trading, requires market expertise, proficiency, market knowledge, and rapid transactions.

3 Swing Trading

This type of stock market trading focuses on short-term stock movements and patterns. Swing trading is utilized to make money from stocks within a few days of buying them, ideally within one to seven days. Traders do technical analysis on stocks to determine the movement patterns they are following to execute their investing objectives properly.

4 Momentum Trading

In the case of momentum trading, a trader takes advantage of a stock’s momentum, which is defined as a significant value movement of the stock, either upwards or downwards. A trader attempts to profit from such momentum by selecting equities that are breaking out or will break out.

In the event of an upward trend, the trader sells the equities he or she is holding, resulting in higher-than-average gains. When the market falls, the trader buys a large number of stocks to sell when the price rises.

Example

In momentum trading, a trader takes advantage of a stock’s momentum, for example, Mr. A owns 7000 shares of S Private Limited at Rs. 50 a share. On April 1, 2019, he expects the NAV of such shares to rise. On the first day, he chooses to sell 3000 shares for Rs. 60. The remaining shares are then sold at uniform pricing of Rs. 65.

As a result, his total profit from the deals is Rs. {(3000 * 60) + (4000 * 65) – (7000 + 50)} or Rs. 90,000

5 Position Trading

Position traders hold shares for months, hoping to profit from equities’ long-term potential rather than short-term market changes. This type of trading is appropriate for people who are not market specialists or frequent market participants.

✅ Impact of Online Trading?

The internet has significantly aided in the advancement of stock market trading. Securities are becoming more accessible and convenient for the average person. Individuals in India may now readily trade in the stock market via internet trading.

Mutual funds have also grown in popularity with the introduction of internet trading. Individuals may now immediately access MFs and other assets from a wide online reservoir of alternatives. Investors may now trade more actively and speculatively, enhancing their profit potential.