Stock trading simply means buying and selling shares in publicly traded companies. This means when you buy the shares of a company, you become a part of the owners of the company, however small it is. This will make you a person who has some claims on the assets and earnings of the company and you get this as dividends or as capital appreciation.
Trading was part of human beings since time immemorial and it has been very prevalent during civilizations. But stock trading came into existence during European imperialism when joint stock companies were formed in Europe. After this period, stock trading became a huge part of trading in many European countries and was then introduced to various other countries. At present, stock trading is one of the widest trading businesses in the world, and with the widening of the internet, it is now available for a larger section of people from all around the world.
Types Of Stock Trading
Stock trading is of different types which depend upon the type of stock you are trading and approaches towards it. But, primarily, stock trading is differentiated based on the time period to which one desires to hold the stock. In this, there are mainly three types of stock trading and they are the following:
👉 Long-Term Trading
Long-term trading, as the term indicates buying a share of a publicly traded company and holding it for a long period of time. The period might vary for each person. For some, it might be years whereas, for others, it may mean holding the share for decades. The main reason why people opt for long-term trading is to benefit from the growth that happens to the company in the future and to earn capital appreciation for all the developments and success attained by the company.
Long-term trading is comparatively less stressful than other types of trading as there is no need for you to follow the stock market trend on a continuous basis. People who hold the shares of a company for a long term are usually called investors or position traders.
👉 Short Term Trading
Short-term trading involves buying a share of a publicly traded company and selling it over in a short span of time. This may vary from days to weeks to months. The main aim of short-term trading is to generate profits easily in a short period of time. Short-term traders usually take advantage of profitable trading trends and fluctuations in the market which might have the potential to give huge profits by holding a share of the company for a brief time.
Short-term trading is very volatile and has more risks associated with it than long-term trading but still has the potential to give profits easily within a few days or weeks. Even though short-term trading is too risky, many traders are involved in this type of trading instead of long-term one.
ALSO READ: Explore The Top Canadian AI Trading Stocks Of 2023
Advantages Of Stock Trading
Some of the major advantages of stock trading are listed below:
- Quick returns on your investment
- Can diversify your investment portfolio
- Higher liquidity
- An easy and convenient way to earn profits
- Better transparency
Disadvantages Of Stock Trading
Even though stock trading is a great way to earn profits easily, there are a few advantages associated with it and they are the following:
- Volatile in nature
- Might be too risky
- High brokerage fee
Conclusion
Stock trading is simply the process of buying and selling a share of a company that you have as your stock and earning profit from it. This is a trading world that is very vast and in this, there are multiple types of trading that you can opt for as per your requirements. Stock trading is usually considered a profitable business where people can make money easily.
However, just like every type of trading, this one is also volatile in nature and has risk associated with it. Therefore, before stepping into the world of stock trading, have an in-depth understanding of it and be involved in it, only if you are confident enough.
READ MORE: What Is AI Trading? And How It Works?
