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The First Step of Trading

Equity trading is the buying and selling of company shares or stocks, also known as equities, on the financial market. There are a few ways in which you can invest in equities. Most equity trading refers to the buying and selling of public company shares through a stock exchange or as over-the-counter products. Equity trading can be classified into five broad categories namely:- Scalping, Day Trading, Swing Trading, Position Trading and Long-term trading.

To do equity trading, you need an equity trading account to do the trade. This account enables you to buy and sell shares of a company and hold them in a dematerialised format or online format. Equity account involves signing up for trading and demat account which will then get linked up with your main savings account for transfer of funds. The main purpose of a trading account is that it hold securities purchased and payments are being allocated through it.

Benefits of Opening a Equity Trading Account

The benefits of a trading account are what makes it a very lucrative choice over physical trading. The benefits which you can enjoy while you own a trading account are:

  • Since nearly all of our trades are happening over the internet now, an online trading account essentially helps us solicit prospective investors who want to trade securities with us. You don’t have to physically look for someone to trade with since your trading account is now doing that for you.
  • A trading account, therefore, lowers your investment costs. It also provides liquidity (converts assets to cash).
  • A trading account is a de facto method to gain access to the stock market. Without one, you’d probably be paying hefty membership fees for a place at the exchanges.

Categories of Equity Trading

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Day Trading

Day Trading is a form of share dealing in which individuals buy and sell shares over the internet over a period of a single day's trading, with the intention of making profit from small price fluctuations.

Scalping Trading

Scalping is trading that involves buying and selling of equity within seconds or minutes. Also referred to as micro trading, scalping attempts to make its profits off small price changes intending to cash in gains.

Swing Trading

Swing trading is based on the price fluctuations in the market. Though this is also a type of short-term trading, it's different from day trading as traders close trades within few days to several weeks.

Position Trading

Position trading is to hold a position open for a more extended period with the expectation that its value would appreciate or depriciate. It aims to make profit from the move in the primary trend than minor price fluctuations.

Long Term Trading

Long-term trading refers to positions held by investors for months or years. Long-term trading is complex and needs to consider the potential value of the underlying stock before holding a position with the goal to sustained gains.



Pros of Equity Market

Equity Market carries along with it some advantages which are discussed below:-

  • Great Wealth Creation - The biggest benefit of equity market is the opportunity to make huge profit.
  • Enter and Exit Easily - You can easily be a part of equity market and make an exit as your own wish.
  • Lower Taxes - Taxes to be paid as compared to fixed deposits is comparatively low in equity trading.



Cons of Equity Market

Equity Market carries along with it some disadvantages which are discussed below:-

  • Lack of Understanding - Without understanding the market and making investment in bad stocks leads to incur losses.
  • Market can be Volatile - Investment return does not move in straight line, there are always upswings and downswings.
  • Capital Erosion Risk - Equity share trading carries along with it the chance of capital erosion.