What is Stock Trading?
Stock trading means purchasing and selling shares in stock exchange-listed companies. In India, this usually happens on stock exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
If someone buys shares of a company, he eventually becomes an owner of a small piece of that company and has a stake in its assets and profits, which can come as dividends or increased capital value. The worth of these shares depends on various factors, including the financial performance of the entity, its future options, its market situation, and the mindset of investors.
How does Stock trading work?
Investment firms, financial experts, and every day individuals all participate in stock trading with the overarching objective of purchasing stocks at a low cost and later selling them at a higher value.
When it comes to buying and selling stocks, you have the option to either utilize the services of a financial advisor or manage it independently through an online brokerage or a trading app. Regardless of who initiates a stock order, these trades are executed electronically.
Among the different types of stock orders that a trader can place are:
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Market order: This order seeks to buy or sell shares at the prevailing market price when the order is made.
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Limit order: In this case, the trader specifies a particular price that the stock must reach before executing the purchase or sale.
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Stop-loss order: Designed to limit potential losses, this order automatically sells a stock when it drops to a predetermined price.
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Day-only order: This order remains active only on the day it's placed.
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Good-til-canceled order: This order stays in effect until it's executed or canceled.
Day traders engage in highly active buying and selling of stocks within a single day, aiming to profit from short-term price fluctuations. It's important to note that day trading carries significant risks.
In contrast, buy-and-hold investors acquire stocks and retain them for an extended period, often spanning several years or more. The strategy involves steering clear of short-term market swings and instead focusing on the long-term growth potential of the investment