Trading in simple language it is to buy or sell goods & services in short term duration to earn the profit. In terms of stock market in India purchasing and selling of shares based on technical evaluation or market trend for short term duration for making money is called trading.
The dissimilarity between investor and trader is investors invest money for the long term and wait for the bull run to make benefit while trader make gain even in bad market circumstance sounds interesting. The trader can make more money than investor hence many people try this trick to make more money but fails. Trading is a mind game. This game is not for faint-hearted. To become a successful trader safely, they must take care of several things.
When anyone wants to trade, they use a broker who will execute the trade on the market. The broker they opt for is an essential investment decision. India presently has around 70 brokers to option between. However, there are numerous top global brokers they can turn to.
Criteria to choose broker for trading in stock market in India
- Speed of execution – Due to the high number of trades they might make in a day, the speed of execution should play a factor. The stock markets are highly volatile, a very little delay in the speed of execution of your trader can lead to variance in price of the stock and thus impact your strategy.
A broker has multiple clients, placing different orders at the same time. This can seriously create a situation of delay in the execution. Therefore, team size and speed of execution plays a very important role while choosing the broker.
- Costs – The lower the fees and commission rates, the more profit they take home, and many will reduce their commission the more they trade. The commission rates may look very small, but at the end of billing cycle the amounts are usually huge.
If you are a long-term investor who is simply going to create a portfolio and wait for months or years, this might not be important for you. But for active intraday traders who place several orders every day, the brokerage charges pay a key role. The profits they make everyday should be at least higher than the brokerage charged on that trade. A lower brokerage charge will eventually lead to higher earnings.
- Regulatory compliance – Make sure that the broker is regulated. They'll be legally obliged to protect their financial interests. As per the Securities and Exchange Board of India (SEBI) all the brokers and advisors necessarily need to be certified by SEBI.
You should check the registration status of your broker, and check whether they are members to the different exchanges for India or not. Later if you wish to trade in multiple segments or exchanges, this is going to help you.
- Spreads – As a day trader they have to demand competitive spreads. Find brokers with tight spreads and their bank balance will thank them for it.
What Can Be Traded in stock market in India
- Forex – The foreign exchange currency market is the most popular and liquid globally. It is legal in India and you can trade in various international currencies including the US dollar, Euro etc.
- Stocks – Physical stocks in individual companies, regular and Leveraged ETFs (an “Exchange Traded Fund” holds multiple stocks or commodities and is traded like a single stock), futures, and stock options. They can buy and sell in the shares of the ICICI Bank, for example, India's largest privately-owned financial institution. This is often referred to as the equity market.
- Binary Options – The easiest and most predictable technique, as the timing and return on a successful trade are known in advance. These are usually the derivatives of a listed equity stock.
- Future: -The future price of a commodity or security fall under the futures segment. These are also derived from a listed equity stock and are amongst the most preferred segment as an alternative to the equity market.
- Commodities – Oil and natural gas, foodstuffs, metals, and minerals etc. are traded under this category. Some of the highest trading commodities including precious metals like gold, silver, crude oil etc.
If they need to branch out from the National Stock Exchange of India and the Bombay Stock Exchange, they can trade in other global markets. If they are S&P 500 day trading, for example, they will be buying and selling the shares of companies, such as Starbucks and Adobe.
In the day trading forex market, they will be trading currencies, such as Indian Rupees, US Dollars, Euros, and GBP. In the futures market, often based on commodities and indexes, they can trade anything from gold to cocoa.
Index funds rapidly occur in financial advice these days but are slow financial vehicles that make them unfavorable for daily trades. These are usually preferred for long-term investment plans.
Another growing part of the interest in the day trading world is a digital currency. Equity trading with Bitcoin, LiteCoin, Ethereum, and other altcoins currencies is a widening business. With lots of volatility, able eye-popping returns, and an unpredictable future, day trading in the cryptocurrency could be an exciting avenue to pursue.
Day Trading Strategies in stock market in India
Traders will employ day trading strategies in forex, grain futures and anything else they’re trading in, to give them an edge over the market. Day trading using the Gann method is particularly famous in India, for example. It’s while that tiny edge that is all that separates successful day traders from losers.
There are several day trading methods out there, but all will rely on accurate data, carefully laid out in charts, tables, and spreadsheets. Options include:
- Swing trading
- Trading zones
- Trading on volume
- Arbitrage trading
- A simple day trading exit strategy
- Utilizing news
It is those who stick religiously to their trading strategies rules and parameters that often seize a slice of the 3 crores daily turnover in the Indian National Stock Exchange.
Trading in any of the market segment has a high risk associated with it and therefore it is very important to know the amount of risk that you can bear in the market. These is usually done by getting your risk profile analysis before entering the market or planning any investment. Your broker or a certified investment advisor can help you calculate your risk profile analysis. The Risk Profile Analysis usually varies with several factors including your income, liabilities and your age. Therefore, you should keep your risk profile updated.