What are the types of trading, which is the most profitable technique?

Short Answer

Trading can be done employing many techniques. Some of them are Intraday trading, swing trading, scalping, and positional trading. Intraday and scalping comprise two forms of trading where the positions are squared off on a particular day. Whereas in positional and swing trading, the positions are held on for weeks or months.

Detailed Answer

What are the types of trading

Trading is different from investing in many ways. While investing in a stock, you analyze the financials and other future prospects. Whereas while trading, financials, and other internal factors are not that significant. Traders go long (buy) or short (sell) a particular stock based on the short-term trend and market volatility.

Although the risk is extremely high in trading, the rewards are quick and high too.

Trading can be categorized in 4 ways, Let's discover the various methods of trading and try to analyze which can be the best for you.

  • Intraday Trading
  • Scalping
  • Swing Trading
  • Positional Trading

1. Intraday Trading

Let’s start with the shortest form of trading which is Intraday trading. As the name implies, Intraday trading involves closing all positions within the same day. In this form of trading, you never carry forward your positions to the next day. Instead, you utilize the market hours to buy or sell multiple stocks and exit them within the same trading session. You will require a lot of skill and knowledge of various technical parameters to be able to generate consistent profits while trading intraday. Leverage is also involved in day trading thus the risk involved in this is higher when compared to some of the other techniques.

2. Scalping

Scalping is another form of intraday trading but the characteristics are marginally different. Scalping is the most concise form of trading, where traders can get in and out of a trade within seconds or minutes. It is principally employed to profit from arbitrage opportunities and other supply & demand anomalies. A scalper takes multiple small trades in a day, depending on the opportunities available to capitalize on all small and big price movements.

3. Swing Trading

Swing trading is another form of trend trading. Swing traders typically carry their trades for more than one trading session and sometimes for weeks. Swing trading requires the application of both technical and fundamental indicators. Be it in an uptrend, downtrend, or sideways market, swing trading can be implemented in any of the situations. The risk involved in this technique is comparatively lower than intraday and scalping as the short-term fluctuations do not create much of a difference. Swing traders look at the broader picture and manage their positions accordingly so that they can benefit from their view on the underlying.

4. Positional Trading

Positional trading is the safest form of trading as it is insulated from short-term market volatility. Positional trading possesses some of the traits of stock investing as it involves buying and holding the position for a significant amount of time. A typical positional trade can last for weeks, months, or even longer, based on the underlying trend. This technique can be applied to stocks based on their underlying sector or on a picking economic trend. Positional trading involves the least amount of risk if executed after proper research and analysis. The extended holding period can encourage you to ignore the intraday volatility and maintain your conviction on your view.

Which is the most profitable trading technique?

Trading involves numerous technical and fundamental parameters hence there is not a single most profitable technique. However, you can minimize the risks involved by employing different techniques and also hedging your trades. Here is the risk involved in different forms of trading.

  • Intraday Trading: Risk (Very High)
  • Scalping: Risk (Very High)
  • Swing Trading: Risk (Medium)
  • Positional Trading: Risk (Low)

If you are a beginner, you can start with swing or positional trading where the risk is comparatively lower. Once you gain expertise and build your skill set, you can progress towards intraday trading followed by scalping.

Tagged With: stock tradingintraday tradingswing tradingpositional tradingscalping
Categories: Stock Trading
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Related FAQs

Can I use intraday profits to take additional positions on the same day?

Profits generated from intraday or positional trades are settled on a T+1 settlement cycle. This means you can only take additional positions from your profits on the following trading day.

Is it possible to make Rs.5000 to Rs.50,000 of profit in a single day in the stock market?

Generating 1000 times returns in the stock market is highly unlikely but not impossible. However, through aggressive trading, scalping techniques, trading in penny stocks, strategies for trading, technical analysis and trading with the market trend, you could get the relevant returns you’re looking for, provided everything favors your decision-making in the desired investment opportunities.

Is Intraday trading good for beginners?

Intraday trading is more risky and challenging when compared to long-term investing. Is it not a preferred option for beginners as it requires considerable capital, expertise, adequate knowledge about trading, and multiple other factors. For beginners, the best way is to deploy the majority of your capital towards long-term investments and use the remaining for hedging or short-term trading.

Which is Best Intraday Tips App for Indian Stock Market?

Making money off the stock market is no easy feat. It would help if you had a calculated investment while reading the stock market and ensuring that you have all the metrics checked out for making a sensible investment.

Is the margin requirement for overnight and intraday positions same?

The margin required for executing intraday trades in futures and options is lower when compared to positional trades. To trade in equity the margin requirement for intraday is 20 to 40%, whereas, for CNC trades, it's 100%.

Is it possible to make Rs.50,000 in profit with your investment?

Making profits off the stock market is easier said than done. However, if you want to make 50,000 rupees as profits, you would have to consider intraday and F&O options in trading. But then factors such as stock selection, investment amount do play a significant role in the profits your reap.

Is Stock Trainer Virtual Trading App safe?

Yes, the stock train virtual trading app is completly safe. It has several thousands of positive reviews for its security and is one of the most downloaded trading applications.

How to know which stocks to trade in with so many companies listed?

One can either invest in bluechip companies or research extensively on the companies they feel would give returns. It also comes down to the type of investment they are ready to make. Hence, figuring out the different companies could take time, experience, and research.

What is the minimum amount I need to start stock trading in India?

A common question that a newbie trader wishes to ask, what is the minimum amount I need to start stock trading in India? A query whose answer we probably look for to initiate our stock investment journey.

How much money do I need to start Stock Trading in India?

Its all based on the share you wish to purchase. You can invest one rupee or two rupees in the stock market while there is no maximum cap on your investment.