Types of Share Trading

Trading is done on stock price for a day or for couple of days.
Trader is not worried about company performance; he is only worried to book profits whenever
the share price rises.

Basically there are two types of trading methods

1. Day trading and
2. Swing trading.

Day Trading

Buying and selling of shares on daily basis is called day trading. Day trader don’t carry stocks to next day, he square off the positions (shares) on same day. Day-trading doesn't not depend too much on stock fundamentals. The game is played more by seat-of-the-pants instinct than anything else, though it has it own science.

The major attraction of day-trading, the downsides are equally dounting. To deal with the risks, small-time day-traders fix a particular amount as the maximum loss they are willing to suffer on any particular day. The range can be anything from a couple of thousands to lakhs. Big-time traders net in or lose lakhs on any particular day as they do not have any fixed limits.

Clearly, day-trading is not for everyone. The trading floor is replete with stories of traders who have lost everything in the pursuit of millions. So much so that 'Fort to Goregaon' is a familiar riches-to-rags phrase. (Fort, in downtown Mumbai , is where the BSE is located. Goregaon is a distant suburb, where you rebase yourself after a hectic losing streak on Dalal Street

Dos and don'ts for day-traders

DO...

Have an analytical mindset

Be street smart

Be flexible

Develop your own system

Keep a stop-loss for every trade

Decide your total loss limits

DON'T...

Believe in hearsay

Stretch your resources

Go against the main trend

Cap your profits too soon

Be sentimentally attached to stocks

Give up too easily

Mainly there are two types of day traders.

i. Scalp trading
ii. Momentum trading

Scalp Trading

A scalp trader buys and sells shares at very low profits (margins) and does multiple
trades on daily basis.

Momentum Trading

A momentum trader identifies the trend and buys shares at bottom and sells at the
high of the trend.
He may do one or two trades or at the most three trades in a day.
He may not do as multiple trades as scalp trader on daily basis.

Swing Trading

A swing trader is just like a day trader but swing trade may hold the shares (positions) for
couple of days like 4 to 5 days, while day trader doesn’t hold shares even for next day.

Swing trader basically trades based on news, breakout and breakdown in technical charts,
based on volume surge, based on up and down trade etc.

Swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren't interested in the fundamental or intrinsic value of stocks, but rather in their price trends and patterns.

To find situations in which a stock has the extraordinary potential to move in such a short time frame, the trader must act quickly. Therefore, swing trading is mainly used by at-home and day traders. Large institutions trade in sizes too big to move in and out of stocks quickly. The individual trader is able to exploit such short-term stock movements without having to compete with the major traders.