Types of Trading

Short selling:
An investor sells short when he anticipates that the price of the shorted stock will fall from the existing price. He borrows a share and sells it. As the share price dips, he buys the same share at a lower price and returns it back, while pocketing a profit in the bargain. An adage that describes short selling is ("selling high and buying low'.) Short selling(Shorting) is an effective tool for traders as it allows us to profit from declining stock and index prices.A definition of "Short Selling" short implies establishing a market position by selling a security one does not own, in anticipation that the price of the security will fall.For eg. Trader anticipates stock ABC will declineTrader enters order to SELL 2000 shares of XYZ at market price and later buys the 2000 shares of XYZ at a much-reduced price. The difference in the prices of the selling and buying is his profit. However if the share prices increase after he has sold at a reduced price earlier, then he ends up with a loss. Hence Shortselling is something that is speculatory to a certain extent and is done in anticipation of quick profits.


Insider Trading:
In your dealings with the stock world, you will often come across the term 'insider trading'. In simple words, the meaning of insider trading is 'the trading of shares based on knowledge not available to the rest of the world.Insider trading has 2 connotations.Corporate personnel of a company buying and selling stock in their own company. When corporate insiders trade in their own securities, they must report their trades to the exchange. Illegal insider trading refers to buying or selling a security after receiving 'tips' of confidential securities information. Thus it is considered as a breach of confidence while in possession of non-public information about the company.Examples of insider trading·Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;·Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;·Government employees who learned of such information because of their employment by the government; and·Other persons who misappropriated, and took advantage of, confidential information from their employers.


Margin trading:
Margin trading is trading with borrowed funds/securities. It is almost like buying securities on credit.Margin trading can lead to greater returns, but can also be very risky. While it lets you actively seize market opportunities it also subjects you to a number of unique risks such as interest payments charged for the borrowed money.