trading

what does stock trading mean? understand it in 5-mins

You may not agree but it is a fact that We all are well aware of the term trading. Trading is not a new concept and It has been with the civilization of man since a very old year. But when we hear the word trading, we feel that it is only a word related to the stock market or share Market which is our misconception. So before going to know details about stock-trading let’s understand the concept of trading with the help of the following examples

Example:1.

  •  A shopkeeper buys an item or goods at a lower price and sells them at a higher price.
  •  A Vegetable seller buys vegetables at a lower price from farmers and sells them to consumers at a higher price in the vegetable market.
trading

Such activity of buying and selling is done by both of them with aiming to make a profit is called trading. Simply the activity of buying and selling is called trading. And who involves trading is called a trader (Here both the shopkeeper and vegetable seller are traders). The trader aims at some profit by trading.

Example:2

  • In the Real estate business, a meditating person(A) will be there who will remain in between two persons Land Buyer(B) and Land seller(C) till the settlement over. And those activities of Buying and selling process are conducted at the Real Estate Office.

trading

Similarly, trading (Buying and selling activity) happens in the stock market also. To organize such activities several stock exchanges are there, where stocks are listed to trade. The Brokers, who mediate between trader and stock exchange through their trading terminals.

What kind of trades can be done on stock exchange

Equity, Commodity, Currency, Indices, Crypto-Currency, and ETFs are traded in the share market or stock exchange. And these are traded by the following two kinds.

i) Equity:- Investors can own a part of a company by trading in the stock market. That is An advantage of the Stock market. A trader is paid to buy a share of a company ( example: RELIANCESBINMARUTIAPPLETESLA, etc.) in exchange is called equity. These stocks are available for trading in the Stock Exchanges like in Indian on the National Stock Exchange (NSE) and the Mumbai Stock Exchange (BSE). These equity shares are also considered as your property after buying them and these are stored in your name in Demate account in electronic form till you sell them. Some companies may give Dividends, and bonuses while getting huge profits in their Business.

ii) Derivatives:- Commodity, Currency, Indices, Crypto-currency is traded by following their contracts, either by future or by Options. though many of these are not deliverable items. Equity also traded by their future and Option Contracts of certain months Like a current month and coming few months.

  • Equity Future and Option
  • Commodity Future
  • Currency Future
  • Indices Future
  • CryptoCurrency

What Commodity is

In India, two Large Exchanges MCX and NCDEX are there to trade commodities. The Natural Products like mining products (Bullion Metals- Gold and Silver, All base metals such as Zinc, Aluminum, Nickel, Lead, etc, Crude Oil and Natural Gas ) listed in MCX and agricultural products (Bajra, Barley, Castor seed, guar, chana, Wheat, etc) listed  NCDEX, are commodities. They are basically traded to their derivatives of Future contracts or Options.

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