What Is Trading In Stock Market

The stock market has always been seen as a gateway to financial growth and wealth creation. Yet, for beginners, it often raises several questions: What is trading in stock market? How does it work? What are the different types of trading?

In simple terms, stock market trading is the process of buying and selling financial securities such as shares, bonds, derivatives, and commodities with the primary aim of making profits. Unlike long-term investing, which focuses on holding assets for years, trading is more dynamic and often involves short- to medium-term positions.

Before diving deeper into the different types of stock trading, it is important to first understand the stock market basics—how trading started, how it has evolved, and what opportunities it offers today.

History of Trading

Trading is as old as civilization itself. From bartering goods in ancient marketplaces to trading shares on global stock exchanges, the process has undergone massive transformation.

Early Barter System: People exchanged goods and services directly.
Introduction of Currencies: Coins and currencies replaced barter, making trade more efficient.
First Stock Exchange: The Amsterdam Stock Exchange was established in 1602, allowing people to trade shares of the Dutch East India Company.

Growth of Exchanges Worldwide: The London Stock Exchange (1801) and the New York Stock Exchange (1792) became key hubs for global trade.
Trading in India: India’s stock market journey began with informal share trading in Mumbai in the 18th century, eventually formalizing into the Bombay Stock Exchange (BSE) in 1875 and later the National Stock Exchange (NSE) in 1992.

Modern Era of Trading

Today, trading is powered by technology. Traders can access markets worldwide with just a smartphone. Advanced tools like algorithmic trading, online brokers, and mobile apps have made trading more accessible and efficient than ever.

Different Types of Trading in Stock Market

One of the most exciting aspects of trading is that there is no single method for everyone. Traders can choose from a variety of approaches based on their goals, risk appetite, and time availability. Following are the different types of trading in stock market in detail:

1. Swing Trading

Definition: Swing trading focuses on capturing price swings that occur over a few days to weeks.
Approach: Traders use technical charts and trend analysis to identify opportunities.
Example: Buying a stock at ₹100 and selling it a week later at ₹115.
Best for: Part-time traders with patience.

2. Scalping

Definition: A fast-paced style where traders make dozens of trades daily to earn small profits.
Approach: Relies on quick execution and liquidity.
Example: Earning ₹2–₹3 per share multiple times in a single day.
Best for: Highly active traders who can focus on screens for long hours.

3. Day Trading

Definition: Trading stocks by purchasing and selling them on the same trading day, with no positions held overnight.
Approach: Depends on intraday market trends and technical analysis.
Example: Buying shares in the morning and selling them before market closes.
Best for: Full-time traders with high risk appetite.

4. Position Trading

Definition: Holding securities for months or years as part of a long-term trading approach.
Approach: Focuses on overall market trends rather than daily fluctuations.
Example: Buying shares of a strong company during a dip and holding until it grows significantly.
Best for: Investors aiming at wealth creation over time.

5. Momentum Trading

Definition: Traders buy stocks showing upward momentum and sell them before the trend reverses.
Approach: Strongly influenced by market news and investor sentiment.
Example: Riding a stock rally after a company announces high quarterly profits.
Best for: Traders who follow news and price action closely.

6. Intraday Trading

Definition: A common short-term trading strategy where all trades are completed during the same trading day.
Approach: Uses charts, price patterns, and intraday trends.
Example: Buying a stock at ₹500 in the morning and selling at ₹520 before 3:30 PM.
Best for: Traders comfortable with real-time decision-making.

7. Fundamental Trading

Definition: Based on company fundamentals like earnings, growth, and balance sheets.
Approach: Traders invest in undervalued companies expecting their true value to reflect in stock price.
Example: Buying shares of a fundamentally strong company during market corrections.
Best for: Long-term investors with analytical skills.

8. Delivery Trading

Definition: Buying stocks and holding them in a Demat account without selling the same day.
Approach: Focuses on long-term appreciation.
Example: Buying 50 shares and holding them for months or years.
Best for: Beginners looking for low-risk entry.

9. Algorithmic Trading

Definition: Uses computer programs to execute trades automatically based on pre-set conditions.
Approach: Removes human emotions and speeds up execution.
Best for: Institutional traders and tech-savvy investors.

10. High-Frequency Trading

Definition: A specialized form of algorithmic trading where thousands of trades happen within seconds.
Approach: Profits are made on small inefficiencies in the market.
Best for: Large institutions with advanced systems.

11. Arbitrage Trading

Definition: Exploiting price differences of the same stock in different exchanges.
Approach: Buy low in one market, sell high in another simultaneously.
Example: Buying on NSE at ₹450 and selling on BSE at ₹455.
Best for: Low-risk, quick-execution traders.

12. Futures and Options Trading

Definition: Involves trading derivative contracts that speculate on the future price of assets.
Approach: Futures obligate you to buy/sell, while options give you the right but not the obligation.
Best for: Experienced traders with strong understanding of derivatives.

Benefits of Stock Market Trading

Trading isn’t just about short-term profits. It offers long-term advantages that make it attractive to both beginners and experienced investors.

1. Wealth Creation

Trading can help in building financial independence.Smart trading strategies can multiply savings into significant wealth.Delivery and position trading are great for long-term wealth growth.

2. Liquidity and Flexibility

The buying and selling of stocks happens much faster compared to real estate.Multiple trading types allow people to choose what suits their lifestyle.

3. Passive Income Opportunities

Dividends from delivery trading offer a steady income.
Long-term investors can enjoy capital appreciation.
Options like covered calls provide passive income streams.

Stock Market Basics for Beginners

If you are just starting your journey, here are a few key stock market basics for beginners to remember:

Understand Risk: Markets fluctuate; be prepared for ups and downs.
Start Small: Begin with limited capital to learn the process.
Use Reliable Sources: Follow reputed platforms and guides.
Take Support: Enroll in professional trading classes to build knowledge.
Practice Discipline: Set stop-loss and exit rules.

For more insights, explore our beginner's guide to stock market where we cover the fundamentals in detail.

Understanding the Stock Market Process

The stock market process follows a clear path:

A company lists shares on the stock exchange through an IPO.
Investors buy and sell shares via brokers.
Prices fluctuate based on demand, supply, and company performance.
Settlement happens through electronic systems where shares move to the buyer’s Demat account.

This process ensures transparency, liquidity, and fair participation for all.

You can also watch "how stock market works"

Conclusion

So, what is trading in stock market? It is the dynamic act of buying and selling financial instruments with the aim of earning profits. From swing trading to futures and options trading, there are many approaches, each suited to different individuals.

Key takeaways:

Trading has evolved from ancient barter systems to modern online platforms.
There are different types of trading in stock market that cater to beginners, professionals, and institutions.
Benefits include wealth creation, liquidity, flexibility, and passive income.

If you’re new, start small, learn the stock market process, and build your skills through trading classes. Remember, success in trading doesn’t come overnight—it requires discipline, patience, and continuous learning.

"Disclaimer: This blog is for knowledge purposes only. Stock market investments are subject to market risks. Always do your own research or consult a financial advisor before making any investment decisions."

Arun K Murali

Arun K. Murali is the Founder of Trade Max Academy, Kerala’s award-winning trading institute, dedicated to helping individuals master financial markets and achieve independence. Turning a ₹50 lakh crypto loss in 2018 into a comeback story, he has since trained over 5,000 students, won Kerala’s Best Trading Institute (2023) and the National Award (2024), and coaches live on YouTube. For Arun, trading is more than a career—it’s a mindset, a lifestyle, and a path to true freedom.