-Ray Dalio
Every Trader dreams of making big money in stock market and wants to be like Warren Buffet or a Rakesh Jhunjhunwala. But only a few managed to achieve it.
There is no rocket science behind understanding the fundamentals of a company, what matters is the persistence. Big Investors like Warren Buffet stay invested in their portfolio for a long period. But it is not everyone’s cup of tea. Long term investment can give you the expected returns but it doesn’t mean you won’t be able to make money in the short run.
For people who are not interested in long term investing can consider trading in equities. This is where millions of traders make a fortune every day and every minute.
Stock market trading has many different faces - some of them involve short-term buying and selling of shares, while others are long term investments. Depending on which extreme you’re looking at - there are two modus operandi or ways of trading in the share markets - intraday trading or delivery-based trading.
When you’re buying and selling of stocks within the same trading day, you’re indulging in intraday trading. In this course of action, stocks are purchased with the aim of earning profits and not with any objective of investment. This is done by harnessing the movement of stock indices, which means that the varied prices of the stocks are harnessed in order to earn profits from trading of stocks.
Let’s take a simple example –
The share of XYZ Ltd was trading at Rs 500/share at 10:15 AM. By 02:15 PM, the stock price had risen to Rs 550/share.
Mr. Raj is an intraday trader. He bought 1,000 shares of XYZ Ltd. for Rs 500 in the morning. When the stock price went up to Rs 550, he sold his shares and squared off his position.
By doing this, he made a profit of Rs 50 per share i.e., Rs. 50,000 profits within a few hours.
Delivery trading is one of the most common trading methods in the stock market. Unlike intraday trading, delivery trading involves a more pronounced intention of investment than just trading opportunities. This is because the investors have it in mind to hold on to their stockholdings for a longer period of time.
In this process, there are no time constraints in the selling of stocks. As long as the stocks are delivered to the associated demat accounts, it is considered as a delivery trade.
Similar to the earlier example, here the trader fixes a target for each stock and exits once the target price is achieved. Hence, he can keep compounding and increasing his capital.
