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The Top Trading Types in India
Crypto Trading

The Top Trading Types in India

| @indiablooms | 13 Jun 2024, 06:02 pm

Hundreds and thousands of people are interested in trading, whether that's trend trading, day trading, or rather trading in cryptocurrency, securities and futures. These are all exciting avenues to explore, but it's essential to know the actual meaning behind each term and methodology, along with the associated risks and requirements.

Each trading type comes with its very own set of rules and regulations, and there's no blueprint for successful trading since the industry is primarily based on predictions and using one's gut feeling and finance background. While the premise may be similar for every form of trading, namely buy something when it's low and sell when it's high, there are a myriad of things to consider beyond the price point.

This article aims to give you an insight and overview of the different trading methods and options.

Crypto Trading in a Nutshell

This first trading type is slightly controversial and quite volatile to be honest, but you know the saying: with great risk comes great reward (and also great responsibility). Cryptocurrency is a relatively new type of asset that joins the ranks of traditional assets like cash, gold and real estate.

It is a digital currency, meaning 100% online designed to work as a medium of exchange through a computer network that is not reliant on any central authority—so, no government or bank is involved at all. This is advantages and drawbacks. The first drawback is that, compared to traditional assets that don't fluctuate too much, the crypto market is a volatile one that requires sound knowledge.

If you are looking into crypto trading make sure that you understand that this is an umbrella term used for Bitcoin, Ethereum, Solana, Tether, Dogecoin and many more. Crypto is not the name of the currency, but rather a broad term referring to a digital currency, the foundation of which is blockchain technology. Crypto is special kind of trading unit and has specific rules, so ensure that you know the basics before you give it a go.

Going with the Trend

The next exciting form of trading is referred to as trend trading, which is pretty self-explanatory. As a noun, trend is defined as a general direction in which something is developing or changing, and the same applies to trend trading, the strategy of which involves traders leveraging existing market trends to execute profitable trades.

Put simply, traders estimate the direction that prices are moving in, based on where they were in the past. Even though it is a rather popular trading type, this approach requires meticulous monitoring and identifying potential patterns before anyone else does. It's challenging, but can be rewarding if you have a keen eye for finance and can assess analytics and charts well.

There are tools available to help traders predict the future market, such as a stochastic oscillator, which is essentially a momentum indicator that compares a particular closing price of a security to a range of its prices over a certain period of time, meaning that it measures the degree of change between prices from one closing period to predict the continuation of the current direction trend.

However, keep in mind that this is merely a tool and the market does what it wants, kind of like an angry toddler throwing a fit. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result. The tools on offer are helpful, but it's still knowledge and experience that count most.

Managing the Margin

Margin trading sounds exciting, doesn't it?

Almost like you are trading in tight spaces.

However, margin trading is less about small margins and more using leverage to boost your purchasing power and make larger investments than you could with your own resources. In short: you borrow money in order to be able to buy more. However, as anyone who has taken out a loan before know, when you buy stock with borrowed money, you run the risk of racking up higher losses not to mention the associated interest.

Let's say you have decided to try your hand at trading, then you did your homework and tried a demo account to get your toes wet. The next step is to open a new brokerage account where you may be offered the opportunity to select a margin account, which essentially allows you to deposit cash and then borrow a larger amount of money to buy investments. There are rules here too.

The bank is not going to let you borrow endless funds and regulations stipulate that investors are permitted to borrow up to 50% of an investment’s purchase price. This type of trading is pretty risky, especially if you don't have years of experience in the industry or a solid background in finance. Probably not the most beginner-friendly way of trading and also not the first steps you'd take if your goal is to trade on the S&P or Nasdaq. Start small, use demo accounts and go from there. There's no rush, take your time.

Whether you decide to try your hand at margin trading, trend trading or crypto trading, the foundation is the same: research, get into the topic, and try to understand why the markets fluctuate. Stay up to date on any and all news, particularly if you are thinking about day trading or commodities trading. As with anything in life, be responsible and trade with care.

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