Get well-versed in trading terms

Trading becomes simplified, if a trader is acquainted or well versed with the terminology associated with share market.

This terminology will equip the trader in analysing charts, interpreting news and arouses the interest to read relevant new articles. It enhances one's trading skills. You will be able to analyse what type of trading would be beneficial.

Prior to that one needs to understand where he or she fits in trading. Trading can be broadly classified into scalping, day trading, momentum trading, swing trading and positional trading.

The above-mentioned options are purely for technical traders.

In intraday trading a trader buys and sells on the same day and does not take stocks for delivery.

Here the trader needs to take quick decisions. His trading time would be between 9:15 am to 3:30 pm. Most of the traders are not even aware of the concept of short selling where you can sell without holding a position.

In swing trading, a trader takes delivery for a day/one week/ three weeks or three months depending on stock movement.

In this type of trading the stocks are taken for delivery. When we cannot observe the market continuously then swing trade would be the right choice.

In momentum trading, traders take positions only when the price reaches a certain level as per their analysis. Prior to the purchase of stock, one makes a proper technical analysis on the chart and decides upon the right entry point.

Once the level is identified then only a trader makes a position so that his profits are assured. In scalping, one trades with big quantity and books profit on small price movement.

For example, buying 2,000 quantity of shares at Rs 500 and selling back at Rs 501 there by making a profit of Rs 2,000. For this, we need more capital and target is very small.

Hedging works even when the market is not moving in favour. In hedging if a trader buys a stock in cash market simultaneously, he will make a position in options market also to minimise his loss and to protect his capital.

An investor takes position and holds on for more than a year. An investor mostly believes in fundamental analysis.

Generally, an investor will invest a part of his capital for a very long term. Anything beyond one year can be considered as investment.

A company's fundamental profile, future plan, future projections—all these affect the investors decision. To earn profits, mastering one style of trading is very important. But the trader also needs to be proficient in others.

(The author is a homemaker who dabbles in stock market investments in free time)