Stock market traders typically select one of the many strategies based on their financial goals, stock trading orientation, and the period they want to stay invested for. In general, there are two types of trading: short-term and long-term.
However, there are two types of trading based on investment strategies: technical and fundamental. And there are three types of trading based on the period: intraday trading, swing trading, and positional trading. As a result of the similarities in their characteristics, these various forms of trading tend to overlap.
Technical trading, for example, is similar to intraday trading, and fundamental trading shares some characteristics with positional trading.
Here’s is the list of the significant types of stock market trading you should know in your 20s:
1. Crypto trading
Cryptocurrency trading is making bets on the price changes of cryptocurrencies using a CFD trading account or by purchasing and selling coins on an exchange.
Without owning the underlying coins, CFD trading is a derivative that enables you to predict changes in cryptocurrency prices. If you think a cryptocurrency’s value will increase, you can go long (also known as “buy”) or short (also known as “sell”) if you think it will decrease.
Trading cryptocurrency CFDs through a broker utilizes the broker’s existing networks and trading platforms, such as Finixio AI, and does not necessitate using a digital wallet.
Finixio AI is a user-friendly digital trading platform that specializes in Bitcoin cryptocurrency. It makes no difference if you have never purchased a single crypto coin or made a stock market trade; Finixio AI is the place to trade Bitcoin.
2. Technical trading
Technical trading is accomplished through thorough technical market analysis—this analysis assists traders in understanding stock price changes and making appropriate trading decisions.
A technical trader can be successful due to his ability to conduct research and knowledge of the stocks. This type of trading would necessitate the trader’s ability to read charts and graphs containing information. Furthermore, the risk involved in this type of trading is relatively high, and pattern recognition is critical.
3. Day trading
Day trading entails buying and selling on the same day, with no positions held overnight. In contrast to scalping, this style requires holding positions for minutes to hours rather than seconds to minutes. A day trader completes all transactions before the market closes. Significantly, most day traders use leverage to increase the returns generated by small price movements.
Day trading is frequently portrayed as a quick way to get rich. This, however, is rarely the case. Day traders typically incur significant financial losses in their first few months of trading, and many never achieve profit-making—the bid-ask spread, trading commissions, and other expenses all disadvantage day traders. Day traders must earn significant trading profits to break even with these costs.
Both scalping and day trading requires a high level of self-control, the ability to quickly learn how to trade a proven and profitable strategy, and sufficient capital to withstand unforeseen and potentially significant losses.
4. Intraday trading
Intraday trading occurs when an investor purchases and sells stocks on the same day. It means that if an investor purchases a set of shares on a given day, they must sell them before the market closes. This type of trading allows investors to use margins to obtain credit from a broker.
Because it is short-term, intraday trading is low-risk, but it can become risky if the trader uses too much margin money. Furthermore, because it allows traders to make payments in the form of small margins, this trading requires comparatively less capital investment.
5. Position trading
Position traders remain in trades for several weeks or months. A position trader attempts to predict whether the current trend will continue much longer than a momentum or swing trade. Position trading gives traders who cannot frequently trade much freedom: profit potential is not reduced, and position traders can make significant gains.
Significantly, short-term fluctuations are unimportant to long-term traders because they believe their long-term investment horizons will smooth them out. In contrast to day trading, position trading seeks to make money from changes in the main trend rather than daily fluctuations.
6. Delivery trading
Delivery trading is a long-term investment regarded as one of the most secure methods of investing in the stock market. This is the most common type of trading in the stock market. The investor engages in delivery trading to keep their purchased stocks longer.
Unlike intraday trading, delivery trading does not allow the use of margins, and the investor must have the necessary funds. This type of trading requires the investor to pay the entire transaction amount. Additionally, delivery trading does not impose any time constraints on stock trading; it simply requires the delivery of stocks to a designated demat account.
In delivery trading, the investor can earn high dividends, voting rights, and other benefits from the company they have invested in. Notably, short selling is not permitted in this type of trading.
Scalping, also known as micro-trading, focuses on repeatedly taking small profits. Typically, trades last between seconds and minutes. A trading strategy known as “scalping” aims to make money off of slight price changes. Because they think small price changes in stocks are simpler to spot than large ones, traders who employ this strategy typically execute 10 to several hundred trades in a single day.
As a stock market trader, you can engage in any of the abovementioned types based on your buying and selling decisions and the reasons that drive those decisions. But always remember to use an authentic platform for trading to keep your investment safe.