What is the stock market, types and how does it works

Disclaimer 

All information provided on this website (THE MONEY UNIVERSE) is for Educational & Informational Purposes only. I am not a SEBI Registered Financial Advisor, Analyst or Broker. 

Introduction

What is the Stock Market? 

Definition

In simple words, the stock market is a place where investors buy and sell shares of companies. There are two ways to participate in the stock market the first is investing, and  trading.

1.Investing

Buying shares with the goal of growing your money over time is called investing. You can sell your shares at any time after buying them, whether it is one month, one year, or ten years later. There are no minimum or maximum holding periods for regular stock investments. 

For example: $5000 investing in the right company with aim to grow your wealth over time. 

There are three Common  ways of investing 

1.Stock investing  2.Index fund investing  3.Mutual fund investing . 

1.Stock investing

Buying shares to grow your money. You can sell your shares at any time after buying them, whether it is one month, one year, or ten years later. There are no minimum or maximum holding periods for regular stock investments. 

2.Index fund investing

 An index fund is a type of investment that allows you to invest in a group of companies in the stock market. The fund is designed to track the performance of that index. 

For example: Nasdaq and Nifty 50

3.Mutual Fund investing 

A mutual fund is a scheme where professional experts and fund managers invest and manage your money in right companies. 

For example: Pooled and manage your money by professional managers. 

Trading 

Definition

A trader buys and sells shares of companies with the expectation of making a profit .In other words Trading is the process of buying and selling shares with the aim of making a profit in the stock market. 

For example:  A trader Buy and sell shares to aim making profit. 

Types of trading

There are four Types of trading

1 Intraday Trading

when people buy and sell shares on the same day and people make profits or losses realized on the same day so it's called intraday trading. The most important thing when you don't sell your share after    market  closing time of share market time if an intraday position don't sell your shares before the close , and if the intraday position is not closed in the required time , the broker may square it off 

For example: Same day trading with aim to make profit

2.Swing trading

Swing trading involves holding a postion for  several days or weeks it is called swing trading. in this type of trading traders have a lot of time to make decisions. 

For example: Few weeks or days to aim make profit

3.Scalping trading

This trading is for a very for short period for few minutes and seconds. in this type of trading, traders has few minutes and he makes profit in this time and they may make many trades in a day for profit. most importantly , because it is very risky so without knowledge don't do this trading

For example : A scalper  hold their money for a few minutes like 5 minutes 10 minutes 1 minutes to make profit. 

4 Position Trading

 In this trading traders hold stocks for a longer period like a week or few months or few days. traders have a more time and they anlayze the market and focus on  market trends and make profit. 

For example: a position trader trades for few weeks or few months to aim make profit. 

Difference Between Investing vs Trading

Investing

In simple words investing focuses on long term with investors grow their wealth over time. Investors  analyze Compnies fundamentals, research Companies sales, profit and loss, balance sheet, economic growth . 

Trading

Trading  Focuses on a short term strategy and opportunities for profit for example a day, few month or few minutes or second.A Trader focuses on technical analysis , Charts and market trends. 

Conclusion

 The stock market can be a good way to build your wealth but if you do not  understand the risk and don't have a knowledge of the stock market you should avoid investing in the stock market. Many people lose  money in this market because they don't have proper knowledge of investing and trading. I hope you like this article. Thank you for reading this article.