What is Trading – Types & Advantages of Online Share Trading

Introduction

Trading is one of the most popular ways to participate in the stock market. In simple words, trading means buying and selling financial instruments like shares, commodities, currencies, or derivatives with the objective of making a profit. Unlike long-term investing, which focuses on wealth creation over years, trading is more about taking advantage of short- to medium-term market movements.

With the rise of technology, online share trading has made stock market participation easier and more transparent than ever. Today, anyone with a Demat and trading account can buy and sell shares with just a few taps on their phone.

In this blog, we’ll explain:

• What trading means in the stock market
• Different types of trading in India
• Advantages of online share trading
• Key differences between trading and investing
• Risks and how to manage them
• Step-by-step guide to starting trading
• FAQs beginners often ask

1. What is Trading in the Stock Market?

At its core, trading is the act of buying and selling stocks or other financial instruments to earn profit from price fluctuations.

• Where does it happen?
  Trading in India happens on regulated stock exchanges like the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
• How does it work?
  When you place a buy order, your broker routes it to the exchange, and if a seller is available at your chosen price, the transaction is completed. Similarly, sell orders match with buyers on the exchange.
• Offline vs Online Trading
  Earlier, traders called brokers or visited offices to place orders. This was slow and costly. Today, online trading platforms and mobile apps allow investors to execute trades instantly, monitor markets in real time, and access research tools—making trading more convenient and affordable.

2. Types of Trading in India

There isn’t just one way to trade in the stock market. Let’s break down the popular types of share trading in India, with examples and pros/cons:

2.1 Intraday Trading

• Meaning: Buying and selling stocks within the same trading day.
• Objective: Profit from daily price movements.
• Example: Buying Infosys shares at ₹1,500 in the morning and selling at ₹1,525 before market close.
• Pros: No overnight risk, potential for quick profits.
• Cons: Requires constant monitoring, high risk if the market turns suddenly.

2.2 Swing Trading

• Meaning: Holding stocks for a few days to weeks.
• Objective: Capture short- to medium-term price swings.
• Example: Buying Reliance shares before quarterly results and selling after a price rally in a week.
• Pros: Less stressful than intraday, good for part-time traders.
• Cons: Risk from overnight events (global news, results, policy changes).

2.3 Positional Trading

• Meaning: Holding shares for weeks to months.
• Objective: Ride long-term trends without daily monitoring.
• Example: Holding an IT stock for 3–6 months during a tech upcycle.
• Pros: Less time-intensive, suitable for working professionals.
• Cons: Requires patience; capital is locked longer.

2.4 Scalping Trading

• Meaning: Making multiple trades in seconds or minutes to capture small price differences.
• Objective: Profit from tiny moves with high frequency.
• Example: A trader may buy and sell the same stock 10–20 times in a day.
• Pros: Quick returns if executed well.
• Cons: Very high risk; needs advanced tools and experience.

2.5 Delivery Trading (Cash Market)

• Meaning: Buying shares and holding them in your Demat account for more than one day.
• Objective: Medium- to long-term ownership.
• Example: Buying HDFC Bank shares and keeping them for years.
• Pros: Eligible for dividends, bonuses, and long-term capital gains.
• Cons: Requires more capital than intraday (full upfront payment).

2.6 Derivatives Trading (Futures & Options)

• Meaning: Trading in contracts that derive value from an underlying stock or index.
• Objective: Speculate on price movements or hedge risks.
• Example: Buying NIFTY call options if you expect the market to rise.
• Pros: Leverage (control large positions with small capital).
• Cons: High risk; misuse of leverage can cause big losses.

2.7 Online Trading Methods

• Mobile Apps: User-friendly, suitable for beginners (example: Samco app).
• Desktop Platforms: Advanced tools for professional traders.
• Web Portals: Easy access via browsers, no installation needed.

3. Advantages of Online Share Trading

Switching from offline to online trading has transformed the stock market for retail investors. Here are the biggest benefits:

1. Accessibility: Trade from anywhere, anytime with internet access.
2. Lower Costs: Discount brokers charge very low brokerage fees compared to traditional offline brokers.
3. Transparency: Real-time prices, instant order confirmation, and detailed statements.
4. Control & Flexibility: You make your own decisions without depending on middlemen.
5. Research Tools: Online platforms provide charts, screeners, news, and analytics.
6. Security & Regulation: All trades are routed through SEBI-regulated exchanges, ensuring investor protection.

(Tip: Samco offers low brokerage, advanced trading tools, and robust platforms for all types of traders.)

4. Trading vs Investing – Key Differences

Analogy: A trader is like a daily commuter, focusing on short, quick trips. An investor is like a long-distance traveller, aiming for steady progress over the years.

5. Risks of Trading & How to Manage Them

While trading can be rewarding, beginners must be aware of risks:

• Market Volatility: Prices can move sharply due to news or events.
• Emotional Trading: Fear and greed often lead to bad decisions.
• Over-leverage: Using too much borrowed money in F&O can wipe out capital.

Risk Management Tips:

• Always use stop-loss orders.
• Avoid putting all money in one stock—diversify.
• Trade with a plan; never chase losses.

1. How to Start Trading in India – Step by Step

2. Open a Demat & Trading Account: Choose a SEBI-registered broker like Samco.
3. Fund Your Account: Transfer money from your bank to your trading account.
4. Learn the Basics: Understand order types (market, limit, stop-loss).
5. Place Your First Trade: Start small—buy a few shares via online app.
6. Monitor & Review: Track performance, refine strategies, and avoid emotional decisions.

Conclusion

Trading is the art of profiting from market movements by buying and selling financial instruments. From intraday and swing trading to derivatives and delivery-based investing, there are multiple ways to trade in India. Online share trading has made the process more accessible, transparent, and cost-effective for everyone.

If you’re a beginner, start small, learn continuously, and trade with discipline.
To explore online share trading with low brokerage, open a Samco account today.