Types of Trading in the Market: Equity, Commodity and Forex Trading
There are various types of trading in the trading market. In this post, we discuss these popular types of trading activities which will be helpful for beginners.
There are three types of trading which are popular among traders:-
- Equity Trading
- Commodity Trading
- Forex Trading
In the stock market, equity trading means buying or selling of equities or shares of a company in the capital market. A market where securities are traded is called the capital market. The capital of a company is divided into shares. The person who buys these shares gets the fractional ownership of the company. This ownership is respective to the shares in proportion of total shares of the company. The person who performs this trading activity is known as the equity trader. It can be performed by the owner of a share or by an authorized agent on the behalf of share-owner.
Equity shares of a company are launched as securities through Initial Public Offering (IPO) in the primary market. After launching, these securities are listed in the exchanges for trading. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the exchange in India for these types of trading. The listed securities then traded in the secondary market as equities for a short or long time.
In equity trading, the gain or loss of investors depends on the profit or loss of the company.
In this type of trading, various types of commodities are traded through the exchanges. In this types of trading, a trader trades in the commodities which are basically the primary economic sector like food, metal, energy etc. These are traded in spot or derivative (future). If a trader wishes to hold a position on a commodity based on its future performance, then he/she trades in derivatives.
Various types of commodities are:-
Agriculture: Rice, Wheat, Beans etc.
Metals: Gold, Silver, Copper etc.
Energy: Crude Oil, Natural Gas etc.
Livestock and Meat: Eggs, Pork etc.
The commodities are traded in India through Multi-Commodity Exchange (MCX) and National Commodity and Derivative Exchange (NCDX).
In commodity trading, the gain or loss of investors depends on the performance like demand-supply and price of the commodity.
Forex is the word which can be abbreviated as Foreign Exchange. A trader can buy, sell, exchange or speculate on a foreign currency in this type of trading. The exchange rate of currency matters in this trading.
In India, Forex trading is known as a grey trading area. It is legal only to certain currencies like US Dollar and Great Britain Pound (GBP). All the brokers are not allowed to trade in this scheme. Brokers registered with NSE, MCX-SX are only allowed to trade in foreign currencies. These exchanges are regulated through the Foreign Exchange Management Act, 1999 (FEMA) in India.
The gain or loss of investors in Forex trading depends on the exchange rate of the currency in which they have invested.
Disclaimer: This post is an educational blog and it does not give any investment advice to its readers.