9 Types of trading in stock market: Meaning, Example, Books
Massive increase in retail participation has been seen in the Indian stock market over the past few years. There is easy accessibility to online trading platforms, low brokerage cost and growing financial awareness, more people are venturing in and trying varied forms of trading in stock exchange.
Nevertheless, most novices confuse trading and investing, or believe that the stock market trading is reduced to buying shares and waiting. As a matter of fact there are a variety of trading styles available in the stock market which are characterized by different strategies, time horizon and profile of risk.
In this complete guide by Trendy Traders Academy, we are going to discuss types of trading in stock market, difference between trading and stock market, stock market trading books, stock market trading time, pre market stock trading.
What is Stock Market Trading?
The trading in the stock market involves trading in financial instruments like;
- Equity shares
- Futures and options
- Exchange-traded funds (ETFs)
- Currency derivatives
- Commodity derivatives
The main aim of trading is to earn profits in the short to medium run of fluctuations of prices.
Trading in the stock markets occurs primarily in India upon:
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
The traders are all interested in volatility, trends, technical indicators, and market sentiment as opposed to long-term fundamentals.
Difference Between Trading and Stock Market Investing
One of the most searched queries is the difference between trading and stock market investing.
Basis | Trading | Investing |
Holding Period | Minutes, hours, days, or weeks | Months or years |
Objective | Profit from short-term price movements | Long-term wealth creation |
Analysis Type | Technical analysis, chart patterns, indicators | Fundamental analysis, financial statements |
Risk Level | Higher due to short-term volatility | Lower if diversified and held long-term |
For example, a trader can purchase NIFTY futures at a 50-point intraday change. The investor can purchase the shares of an Indian blue-chip company and keep it for 5 years.
Understanding this difference between trading and stock market helps beginners choose the right approach based on personality and risk tolerance.
Types of Trading in Stock Market
Now let us explore the major types of trading in stock market in the Indian context.
- Intraday Trading
- Scalping
- Swing Trading
- Positional Trading
- Delivery Trading
- Momentum Trading
- Futures Trading
- Options Trading
- Algorithmic (Algo) Trading
1. Intraday Trading
The intraday trading refers to the selling and the buying of the shares on the same day.
Key Features:
- No overnight positions
- High leverage available
- As per short-run price fluctuations.
Example:
At 10:00 AM, one buys 500 stocks of a banking stock and sells at 1:30 PM when it transpires to have a 2 percentage point movement.
Advantages:
- No overnight risk
- A number of opportunities every day.
Risks:
- High volatility
- Emotional decision-making
The active traders in India use intraday trading because there is liquidity in NIFTY, BANK NIFTY and heavy cap stocks.
2. Scalping
Scalping is an advanced form of intraday trading where traders aim for small profits multiple times a day.
Holding Period:
- Few seconds to minutes
Focus:
- Bid-ask spread
- Micro price movements
Example:
A trader captures 5–10 points in BANK NIFTY futures multiple times.
Scalping requires:
- Fast execution
- Strong discipline
- Deep understanding of price action
It is not recommended for beginners without structured training.
3. Swing Trading
Swing trading involves holding positions for a few days to weeks.
Objective:
- Capture short-term trends
Example:
A trader buys a stock after a breakout and holds for 7–10 days.
Swing trading combines:
- Technical analysis
- Basic fundamental filters
This type of trading suits working professionals who cannot monitor markets full-time.
4. Positional Trading
Positional trading involves holding positions for weeks or months.
Characteristics:
- Medium-term view
- Based on broader market trends
Example:
Buying NIFTY futures expecting a multi-week rally.
Positional traders focus on:
- Weekly charts
- Macro trends
- Sector rotation
This approach balances trading and investing strategies.
5. Delivery Trading
Delivery trading involves buying shares and taking full ownership in a demat account.
Unlike intraday trading:
- Shares are not squared off same day
- No leverage in most cases
Example:
Buying shares of an Indian FMCG company and holding for 6 months.
Delivery trading is often confused with investing. However, delivery traders may exit within weeks or months.
6. Momentum Trading
Momentum trading consists of selling and buying stocks whose momentum is performing well either up or down and selling them when the momentum begins to decline.
Momentum trading is done in India in:
- NIFTY stocks
- BANK NIFTY stocks
- Big stocks and high volume stocks.
Advantages:
- Quick profit opportunities
- Performs well in the trending markets.
Risks:
- Sudden trend reversals
- Needs a firm command of stop-loss.
Active traders that tend to pursue short-term price gains in the trending stocks and indices prefer momentum trading.
7. Futures Trading
Futures trading involves contracts to buy or sell an asset at a predetermined price.
In India, futures are available for:
- NIFTY
- BANK NIFTY
- Stocks
- Commodities
Advantages:
- Leverage
- Ability to short sell
Risks:
- High margin requirement
- Mark-to-market losses
Futures trading is widely used by experienced traders.
8. Options Trading
Options trading entails contracts to have the right rather than the mandate to either purchase or sell an asset.
Types:
- Call options
- Put options
The popularity of options in India is because weekly expiry is available in NIFTY and BANK NIFTY.
Strategies include:
- Buying calls or puts
- Selling options
- Spreads and hedging policies.
Options trading is very profitable and one must have a good knowledge of volatility and time decay.
9. Algorithmic Trading
Algorithmic trading uses computer programs to execute trades based on predefined rules.
Used by:
- Institutional investors
- Advanced retail traders
In India, algo trading has increased significantly with API-based platforms.
It requires:
- Programming knowledge
- Strategy backtesting
- Risk management systems
Best stock market trading books
The 5 best stock market trading books (easy to professional traders) are listed below.
- Financial Markets Technical Analysis– All the way to charts, indicators, trends and technical analysis.
- Trading for a Living- Discusses the psychology of trading, risk management and strategies.
- Market Wizards– Best tips and ideas of the most successful traders of the world.
- How to Make Money in Stocks- Famous CAN SLIM method of technical and fundamental analysis.
- Memoirs of a Stock Operator– Age old knowledge on the psychology of trading and market behaviour.
Best stock market trading books for Indian traders: Book 1, 2, and 4.
Best stock market trading books for mindset and experience: book 3 and 5.
How to Choose the Right Trading Type?
- Risk tolerance
- Capital availability
- Stock Market Trading Time commitment
- Psychological discipline
For example:
- A full-time trader may prefer scalping or intraday trading
- A working professional may prefer swing trading
- A conservative participant may choose delivery trading
At Trendy Traders Academy, we guide learners to identify a trading style that matches their personality. Traders should avoid impulsive decisions during pre market stock trading.
Risk Management Across All Trading Types
Regardless of the types of trading in stock market:
- Use stop-loss orders
- Maintain risk-reward ratio
- Avoid over-leveraging
- Diversify positions
In India, professional traders normally take 1-2per cent of capital per trade.
Common Mistakes Beginners Make
- Overtrading
- Ignoring stop-loss
- Trading without a plan
- Following random tips
- Not understanding stock market trading time
Avoiding these mistakes improves survival in the market.
Role of Discipline and Psychology
Trading success depends on:
- Emotional control
- Consistency
- Strategy execution
Many traders fail not because of lack of knowledge but due to poor discipline. Understanding market psychology is as important as understanding charts.
Conclusion
There are various types of trading in stock market which can be applied in stock market according to various personalities, pre market stock trading, capital base and risk tolerance of an individual. Intraday and scalping, swing and positional trading to mention just a few, each of them needs certain skills and discipline.
Before investing capital in the stock market one must understand the stock market trading time, how the stock markets trade before the market opens and how the trading and investment in the stock market can be distinguished. The Indian markets are a huge opportunity that only those who go there with knowledge and well-organized plans can conquer.
In case you are serious about trading skills, then begin by choosing a trading style that fits your objectives. Read authoritative books on stock market trade, train risk management and use formal mentorship. Right education and discipline will enable one to make a systematic process out of trading rather than a gamble.
FAQ'S
What are the major types of trading in stock market?
Major ones include intraday, scalping, swing, positional, delivery, futures, options, and algorithmic trading.
What is the Indian stock market trading time?
The stock market trading time is regular between 9:15 AM and 3:30 PM and there is also a pre-open trading between 9:00 AM and 9:15 AM.
What does pre market stock trading mean?
Pre market stock trading is the strategy of placing the orders prior to the actual market openings in order to establish the price at the start.
What is the difference between trading and stock market?
The aim of trading is to get short term gains as compared to the long term creation of wealth & investing.
What kind of trading does a beginner prefer?
Swing trading/delivery trading is usually more appropriate to beginners because they are not as stressful and risk is moderate.
