Even though investment and trading have same textbook meaning, ‘Trading’ term is used for active investments and persons who trade in stock markets are called Traders.
In relation to stock markets ‘trading’ term is getting more response, replacing investment. In simple, trading means active buy and sell deals in securities like shares, derivatives, commodities, currencies, mutual funds etc..
For assurance, all intraday deals are called as trading.
In foreign stock markets word ‘Trading’ is more popular than that of Investment
To discuss about live or intraday stock markets, we use the term trading.
For example, we use ‘market trading hours’ to say working hours of markets, because here the case is about intraday markets.
Another example we quote that a stock is trading at Rs.x/- or Sensex is trading at X points, as they mean live stock markets. Other examples are trading volumes, traded stocks all are related to day markets.
The stock exchanges are themselves naming some securities like ‘Currency trading’ ‘Mutual fund trading’.
Different types of trading:
Cash trading: The trading in normal shares is termed as cash trading. It includes both intraday and delivery deals.
Derivatives trading: The trading in derivatives or F&O section. It includes two types.
Futures trading: the buying, selling, shorting of futures of stocks or index refers to futures trading.
Options trading: the selling and buying of ‘calls and puts’.
Commodity trading: The trading in different commodities like metals, Agri-commodities.
Gold trading: The buying and selling of gold units through Stock markets or Gold ETF’s.
Currency trading: The betting of various currencies over other currency rates. For example, rupee against dollar.
Trading options available and their main purposes:
Trading in shares: common form of investment helps to grow our money along with the growth of Indian companies. Generally return good profits in long-term investments. Risk level is optimum and mainly depends on company fundamentals and its sector.
Derivatives trading: they are more risky and return great profits, also useful for hedging to protect our other investments. For example, by buying appropriate futures or options, losses from our shares can be minimized.
Trading in commodities: useful for the Business-persons in that commodity field. For example, trading in steel will very beneficial for steel Business-man to protect themselves from sudden variations in steel prices.
Trading in Gold units: on the recent times, gold is competing with shares in returns. Gold trading is also an best opportunity to tolerate the rising inflation troubles.
Trading in currencies: helpful for exporters and importers to protect their profits, due to losses occurring from sudden fluctuations in currency exchange rates.
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