What Is Stock Market Trading | Stock Market Trading Platform Full Guidance Details

Stock market trading means buying and selling shares in the stock market. The stock market is a platform where shares of various companies are bought and sold. Through stock market trading, investors aim to increase their capital by earning profits from the rise in share prices or dividends.

In this article, we will explain stock market trading in detail and also explore how stock market trading platforms work.

What Is Stock Market Trading?

Stock market trading is the process where investors or traders buy and sell stocks (shares) of companies listed on the stock market. By trading in the stock market, investors can earn returns through price appreciation (capital gains) or dividends from the companies they invest in. Traders may also take advantage of price fluctuations to make short-term profits.

Purpose of the Stock Market:

• Raising Capital: Companies issue shares to raise money, which they use to grow their business.

• Providing Profits to Investors: Investors earn through price appreciation or dividends from the shares they hold.

• Economic Growth: The stock market supports the economy by ensuring the flow of capital, which helps in the overall development of the country.

What Are Stock Brokers?

A stock broker is a professional or a firm that acts as an intermediary between investors and the stock market. They facilitate the buying and selling of stocks (or other financial assets) on behalf of individual or institutional investors. When you want to buy or sell shares, you typically do so through a stock broker, who executes the trade on your behalf on the stock exchange.

Types of Stock Brokers

Full-Service Brokers:

These brokers offer a wide range of services, such as investment advice, financial planning, research reports, and even tax planning. They typically serve to investors who need personalized services and are willing to pay higher fees for it.

Examples: ICICI Direct, HDFC Securities, Angel One.

Discount Brokers:

Discount brokers offer a more streamlined service by only providing the basic functionalities of executing buy and sell orders for a much lower fee. They generally do not provide advisory services or research reports, which makes them a good option for experienced or self-reliant investors who don’t need much assistance.

Examples: Zerodha, Upstox, Groww.

Online Brokers:

Online brokers offer platforms where investors can trade securities through websites or mobile apps. These brokers typically charge lower fees since there is less overhead cost involved.

Examples: Robinhood, E*TRADE.

Types of Stock Market Trading

In the stock market, there are several types of trading, which requires different strategies, timeframes, and risk management. Here are the main types of trading:

1. Day Trading

• Day traders buy and sell stocks within the same day. They make quick trades, often several times a day, to profit from small price movements. A day trader holds stocks for very short-term (a few minutes to hours).
• Goal: Make profits from small price changes, without holding stocks overnight.

2. Swing Trading

• Swing traders hold stocks for a few days to a few weeks, aiming to profit from price "swings" or trends. The time frame for swing trading is short to medium-term (several days to weeks).
• Goal: Capture gains from short-term market movements.

3. Position Trading

• Position traders hold stocks for a longer period, from weeks to months, based on the belief that the stock’s price will rise over time. The timeframe for position trading is Medium to long-term (weeks to months).
• Goal: Profit from long-term trends.

4. Scalping

• Scalpers make lots of very quick trades, usually holding positions for just a few seconds to minutes, aiming to make small profits many times throughout the day. For scalping, traders choose very short-term time period. (seconds to minutes).
• Goal: Make tiny profits on each trade, but many trades add up to significant gains.

5. Investing (Long-Term Investing)

• Long-term investors buy stocks and hold them for years, based on the belief that the company's value will grow over time. They don’t worry about short-term price fluctuations. Long term investing in stock market is for Long-term (years).
• Goal: Benefit from the long-term growth of a company or market.

6. Algorithmic Trading (Algo Trading)

• This type of trading uses computer programs or algorithms to automatically buy and sell stocks based on predefined criteria (like price or volume). The time frame for algo trading varies (can be very short-term or longer).
• Goal: Use technology to trade faster and more efficiently than humans.

7. Options Trading

• In case of options trading, instead of buying stocks directly, options traders buy contracts that give them the right to buy or sell stocks at a set price before a certain date. This can allow for higher returns, but also higher risks. The timeframe for options trading varies, depending on the contract (could be weeks or months).
• Goal: Profit from changes in the stock price, while limiting the amount of money invested upfront.

What Are Stock Market Trading Platforms?

Stock market trading platforms are online tools or apps where investors can buy and sell stocks, bonds, mutual funds, and other financial products. These platforms make it easier for users to manage their investments, place buy/sell orders, and track their portfolios.

Popular Stock Market Trading Platforms:

Zerodha:

Zerodha is India's largest and most popular online brokerage platform. It offers low fees and a simple user interface.

Upstox:

Upstox is a low-cost platform that offers fast and affordable trading services.

Angel One:

Angel One is a well-established platform in India known for its research tools and customer support.

ICICI Direct:

This platform is offered by ICICI Bank and provides a wide range of investment services.

Robinhood:

Robinhood is a well-known platform in the US that allows commission-free trading.

Steps to Start Stock Market Trading

Open an Account with a Broker:

• To start trading, firstly you need to open a demant and trading account with a stockbroker (like Zerodha, Upstox, Groww, etc.). This requires completing the KYC (Know Your Customer) process. This account is required to buy and sell shares, and it is provided by your broker.

Choose a Trading Account and Broker:

• Your trading account is where you place your buy and sell orders. You should choose a broker who offers low fees and good customer service.

Build Your Portfolio:

• Before investing, decide what type of investor you want to be—whether you prefer long-term investment or short-term trading. This will help you choose the right stocks.

Start Trading:

• Once your account is set up, you can start buying and selling shares using your chosen trading platform.

Frequently Asked Questions

1. How does stock market trading work?

When you trade in the stock market, you buy shares of a company at a certain price. Later, if the price of those shares rises, you can sell them for a profit. If the price falls, you may sell at a loss. You can also trade other financial instruments like options or bonds.

2. Do I need a broker to trade in the stock market?

Yes, typically, you need a broker to buy and sell stocks. A broker can either be a person or an online service (platform) that executes your trades on the stock exchange. Today, many people use online brokers for convenience and lower fees.

3. What is fundamental analysis in stock trading?

Fundamental analysis involves looking at a company’s financial health, including earnings, revenue, growth potential, and industry position, to decide whether its stock is a good investment.

4. What is a stock portfolio?

A stock portfolio is the collection of stocks and other investments you own. It can be diversified to reduce risk by holding different types of assets in various sectors.