Stock Market Trading - Types of Trading and Its History

Imagine you’re at a big, bustling marketplace, but people buy and sell tiny pieces of companies instead of buying fruits, vegetables, or clothes. These pieces are called stocks, and the place where this buying and selling happens is called the stock market. It’s like a giant shop where people trade ownership in businesses. Some do it to make money quickly, while others grow their savings over time.

What is the Stock Market?

Let’s start with the basics. A stock is like a small piece of a company. When you buy a stock, you own a tiny part of that company. For example, if a company like a popular phone maker or a soft drink brand is divided into 100 pieces and buys one piece, you own 1% of that company. The stock market is the place where people come to buy and sell these pieces.

The stock market isn’t a single shop but a system where these trades happen. Some trading happens in big buildings called stock exchanges, like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India. Nowadays, most trading happens on computers and smartphones through the internet, so you don’t need to visit a building!

There are two types of stock markets:

Organised Market: 

This is like a well-run school with strict rules. Everything is proper, and there are laws to ensure fair trading. The BSE and NSE are examples of organised markets.

Unorganised Market: 

This is like a street market with no strict rules. People trade however they want, but it’s riskier because there’s no one to ensure everything is fair.

The organised market is safer and more common, so we’ll focus on that.

The History of Stock Market Trading in India

Let’s take a trip back in time to understand how the stock market started in India. Way back in 1875, a group of people in Mumbai decided to create a place where they could buy and sell stocks. They called it the Native Share and Stock Broker’s Association. Later, this became the Bombay Stock Exchange (BSE), one of the oldest stock exchanges in the world! In its first year, 318 people were trading stocks on the BSE.

Fast-forward to 1992, and another big stock exchange was born in India: the National Stock Exchange (NSE). It was officially recognised in 1993 and started trading in 1994. The NSE made trading easier using computers, which was a big deal back then.

Why Do People Trade in the Stock Market?

Before we dive into the types of trading, let’s understand why people trade stocks. Imagine you buy a stock for ₹100 today, and next week, its price goes up to ₹120. You can sell it and make a ₹20 profit! Or, if you hold onto it for years, the cost might grow to ₹500, giving you a much bigger profit. But there’s a catch sometimes the price can fall to ₹80, and you might lose money. Trading is about guessing when to buy and sell to make money.

Some trade to make quick profits in a day or week, while others invest for years to save for big goals, like buying a house or retiring comfortably. The stock market is exciting because it allows everyone to grow their money, but it’s also risky, like a game where you can win big or lose.

Different Types of Stock Market Trading

There are many ways to trade in the stock market, just like there are many ways to play a game. Each type of trading has its style, and people choose the one that suits them best. Let’s explore the main types of trading in a way that’s easy to understand.

Day Trading

Imagine you’re at a fruit market, and you buy apples in the morning when they’re cheap. By the afternoon, the price goes up, so you sell the apples to make a profit all before the market closes. Day trading is precisely like that, but with stocks.

In day trading:

• You buy and sell stocks on the same day.
• Trades can last a few minutes or hours, but you must sell everything before the stock market closes (usually around 3:30 PM in India).
• The goal is to make small profits by buying low and selling high multiple times daily.

Who does day trading?

• People who know a lot about the stock market.
• Those who can watch stock prices all day and make quick decisions.

Example:

• You buy 10 company stocks at ₹50 each in the morning (total ₹500).
• By noon, the price rises to ₹55 per stock.
• You sell all 10 stocks for ₹550, making a ₹50 profit in a few hours.

Is it risky? Yes! Stock prices can go up or down quickly. If you buy at ₹50 and the price drops to ₹45, you lose ₹50. Day trading is like a fast race you need skill and luck to win.

Scalping

Scalping is like day trading but even faster! It’s like buying and selling apples in just a few minutes, over and over again, to make tiny profits each time. Scalpers trade dozens or even hundreds of times a day.

In scalping:

• You hold stocks for just a few seconds or minutes.
• The goal is to make small profits (like ₹1 or ₹2 per stock) many times.
• You need to be glued to your computer or phone, watching prices every second.

Who does scalping?

• Experts who understand the market very well.
• People who love fast action and can handle stress.

Example:

• You buy 100 stocks at ₹100 each (total ₹10,000).
• In 5 minutes, the price rises to ₹101.
• You sell for ₹10,100, making a ₹100 profit.
• You do this 20 times daily, aiming for ₹2,000 in total profits.

Is it risky? Very risky! If the price drops even a little, you can lose money. Sometimes, losses are bigger than profits. Scalping is like juggling you need to be quick and careful.

Swing Trading

Swing trading is slower than day trading or scalping. It’s like planting a seed and waiting a few days for it to grow before picking the fruit. In swing trading, you hold stocks for several days to a week.

In swing trading:

• You buy stocks and wait for the price to “swing” up or down.
• You study the company and its stock carefully to guess if the price will rise.
• It’s less stressful than day trading because you don’t need to watch prices every minute.

Who does swing trading?

• People who can spend time studying stocks.
• Those who don’t want to trade all day but still want to make profits.

Example:

• You buy 50 stocks at ₹200 each on Monday (total ₹10,000).
• By Friday, the price rises to ₹220 per stock.
• You sell for ₹11,000, making a ₹1,000 profit.

Is it risky? It’s less risky than day trading or scalping, but you still need to guess the market right. If the price falls, you might lose money. Swing trading is like fishing you need patience and a good plan.

Momentum Trading

Momentum trading is like surfing, you ride the wave when it’s strong! In this type of trading, you buy stocks that are moving fast in one direction (up or down) and try to make money from that movement.

In momentum trading:

• If a stock’s price is going up quickly (called upward momentum), you buy it and sell when it’s high.
• If a stock’s price is falling fast (downward momentum), you might buy it cheap and wait for it to rise later.
• You need to spot trends, like noticing which stocks everyone talks about.

Who does momentum trading?

• People who can spot popular stocks or trends.
• Those who like excitement and quick decisions.

Example:

• A company’s stock is rising because it launched a new product. You buy 20 stocks at ₹300 each (total ₹6,000).
• The price jumps to ₹350 in a few days.
• You sell for ₹7,000, making a ₹1,000 profit.

Is it risky? Yes, because trends can change suddenly. If the momentum stops or reverses, you could lose money. Momentum trading is like chasing a fast-moving train you need to jump on and off at the right time.

 Position Trading

Position trading is like planting a tree and waiting years to grow big and give fruit. In this type of trading, you hold stocks for months or even years.

In position trading:

• You buy stocks in companies you believe will grow over time.
• You don’t worry about small price changes day to day.
• It’s perfect for people who want to save money for the future, like for a house or retirement.

Who does position trading?

• People who don’t want to trade often.
• Those who believe in a company’s long-term success.

Example:

• You buy 10 stocks of a good company at ₹500 each in 2025 (total ₹5,000).
• By 2030, the price will grow to ₹1,500 per stock.
• You sell for ₹15,000, making a ₹10,000 profit.

Is it risky? Choosing strong companies is less risky, but it still depends on the market. If the company does poorly, you could lose money. Position trading is like slowly building a house, but it is rewarding.

How Has the Internet Changed Stock Market Trading?

In the old days, trading was hard. You had to visit a stock exchange or call a broker to buy or sell stocks. It was slow, and only wealthy or well-connected people could do it.

Now, thanks to the internet, trading is super easy! You can:

• Trade from anywhere, your home, office, or even while travelling.
• Use apps on your phone to buy and sell stocks in seconds.
• Learn about stocks online through videos, articles, and forums.

The BSE and NSE have websites and apps where anyone can open an account and start trading. This has made the stock market open to everyone, not just experts or wealthy people.

Things to Remember Before Trading

The stock market is exciting, but it’s not a magic money machine. Here are some tips to keep in mind:

• Learn First: Understand how the market works before you start. Watch videos, read books, or ask someone who knows.
• Start Small: Don’t put all your money in at once. Try with a small amount, like ₹1,000, to learn.
• Be Patient: Making money takes time. Don’t expect to get rich overnight.
• Know the Risks: You can lose money, so only use money you can afford to lose.
• Ask for Help: If confused, talk to a financial advisor.

Conclusion

The stock market is like a big game where people buy and sell pieces of companies to make money. It started in India in 1875 with the BSE and the NSE in 1993, making it easier for everyone to join. Whether you want to trade fast like in day trading or scalping, wait a few days with swing trading or momentum trading, or hold stocks for years with position trading, there’s a style for you.

Thanks to the internet, anyone with a smartphone can trade from anywhere. But remember, the stock market is exciting but risky. Learn, start small, and be patient. With time and practice, you can use the stock market to grow your money and achieve your dreams, whether buying a new phone, a house, or saving for a happy future.

Related Articles:
1. How Does the Stock Market Work in India?
2. How to Learn Stock Market Trading?
3. Stock Market Analysis : Meaning, Importance and more
4. Share Market Timings: Opening & Closing Time in India