Making money in stock market is an art. If you have the skill then you can earn millions from stock market. Before direct jumping, first lesson is developing your skill. In this article I will discuss about 7 efficient way of making money from stock market via trading.
5 Most efficient ways to make money by trading in stock market
In Stock Market there are several ways of making money.
In long term you can can create wealth by investing in quality stocks, where as in short term you can earn by trading.
As I have said trading in stock market is an art, so first you should develop it. Without learning or getting experience it is almost impossible to earn money from stock market.
Here by doing trade in stock market you can make money, here are the 10 important ways of trading by which you can make money from stock market.
We will discuss them one by one in details.
Make money by Trading in Equity
When you enter into stock market, there are two segment one is cash segment and second it derivative segment.
In cash segment we trade in equity.. Trading in equity is simply when you buy any share at lower price, and when the share goes up then you sell that share at the top, and book your profit, is called equity trading.
On NSE (National Stock Exchange) there are more than 7000 companies listed, but not all are for trading.
For trading we only choose the most active shares, where lots of buyers and sellers are available at any time. So that we can easily sell the share and easily buy the share at each level.
The general idea is to only buying or selling those shares where volume is very high, to find these types of share you should always choose Nifty 50 Stocks, and Next Nifty 500 stocks.
These stocks are very good to trade.
This is the first way of making money by trading in equity.
Also Read – How to do intraday trading for beginners
Make Money by trading in Futures
In Stock Market the second way is trading in futures.
To trade into futures we select those stock which are available in futures segment.
Actually these are cash stocks, there are more than 200 stocks which trade in future segment.
For each share trading in cash market have different price , and for futures have different price. Generally the future price is above the cash price.
If the future price of the share is more than cash price then the difference is called premium, and traders view on that stock is bullish.
But if the future price of any stock is lower than cash price then it’s is said that stock is trading in discount, and trader have a bearish view on the stock.
Benefits of trading in to futures
Here the major benefit of trading into futures is that you can buy the share (taking long position) as well as you can sell the share (taking short position).
In cash segment you can not take the delivery buy first selling, because if the stock goes in Auction then you should have pay heavy charge on it.
Therefore, if we have any bearish view on any stock, and we think in coming days stock will fall then we can short the stock in futures.
Also Read – How to trade bank nifty with a Gap up opening
Lets understand it with an example :
Recently a roport have been published about Adani group stocks, that There is a heavy debt on Adani group, and recently from few month the stocks of these group have outperformed. But now major concerned is the valuation, stocks are trading at very high valuation that not justified.
So if you think in coming day we can see some correction or profit booking in Adani stocks then you can directly Short the Adani group stocks at top level.
And when the stock fall then by cutting your short position in futures you can earn the profit.
Trading in lot size
The Next benefit trading in futures is in cash market you can buy the share without lot like 2,5, 9, 65 etc, but in futures there are lots, in lot it could be 500, 300, 1000 or any numbers of stocks can be kept.
So to buy one lot you are buying 500 quantity in one oreder, if you buy 5 lot then you are buying 2500 quantity.
Make money by trading in Options
After futures Options is also the part of derivative segment.
In Options trading we make money by selling the options (which is called Options writing) or by buying the Options (called options buying).
Make money by Option writing
In Option writing whatever premium options buyer pay, Option writer earn money by getting those premium.
It is said that in Option writing there is unlimited loss, but an option writer always make money.
In Options writing a skill trader with a proper skill, trade with a calculated risk, so most of the time he earn money.
But the major issue with option writing is that you need enough capital to trade , generally to trade in one lot you should have at least 2 lakh.
However by hedging you can decrease your position cost.
In most of the cases HNI, Big Funds, and portfolio manager make money by writing options. Because they have lots of money to write the options.
Make Money by Option buying
In Options buying mostly retail traders participate, because they have low capitail.
They only have to pay the premium, so their buying cost is very low.
In Options buying there is limited risk, but unlimited profit, said by traders, but mostly Options buyer loose money and Option writer make money.
It is said that in stock market 98% of trader loose money by options buying, only 2 percent earns, those are highly skilled and professional.
Among these traders one name is very famous in Options Buying, that is Ghanshyam Sir, He is an exceptions and he made millions in Options buying.
You will find him on Youtube, He has two channel on Youtube, Ghanshyam Tech and Art of Trading.
Also Read – Bank Nifty trading strategy – Big reason to lose earned profit as an Option Buyer
Make Money by trading in commodity
Next popular way is trading in commodity, commodity market is different than equity market.
In Equity market we trade in company shares, where as in commodity market traders trade in Crude Oil, Metals, agro commodity etc.
Trading in Crude Oil, Gold, Silver and some agro products are very famous.
In commodity market including futures , Options is also available by the exchange.
Detailed Video on Trading
Can we make money by trading into Index ?
Yes, for index trading Nifty and Bank nifty index are very popular. Lots of trader trade in Nifty and Bank Nifty and earn money as well as loose money. But with a proper risk management you can make money by trading index.
In Nifty and Bank nifty which index trading is most popular ?
In Future and Options which is more risky ?
Both are risky if you don’t have the proper skill, it is said if you don’t know trading, then future trading will destroy your future and Option will make your capital zero.
For New Trader which segment is better ?
Always advised for new trader, they should start trading in equity.
How much can i earn from stock market ?
There is no limit, how much you can earn, but the dark side is in starting with earning mentality you can loose everything. So in starting try to learn no earn.
Can we earn by Options buying ?
Yes, it’s possible to earn by Options buying, Ghanshyam Tech is an example, who is making millions in Options Buying.
Nirmal is a NISM Certified Derivative Trader & the Founder of InvestandEarn.net (Financial Blog). He entered the world of Equity research to explore his interests in financial markets having 5+ Years of Experience in Share Market Trading & Investing. Nirmal frequently writes about Share Market Trading & Investment and publishes his personal view on the market. Drop him a mail at firstname.lastname@example.org.