You may be in your job and want to earn a side income without investing much time. You might hear about online trading to earn money in India.
Last year’s lockdown exponentially increased the trading volumes as people tried their luck in different trades such as stocks, commodities, and cryptocurrencies.
In the first 5 months of 2021, the increase in new stock traders has increased 3X as shown below –
You can set up a side income stream through trading by spending 1 to 2 hours daily. I would suggest you first learn the basics of trading before taking a high-volume risk.
In this article, we will discuss the 5 most popular trading types that you can pick to start earning money online as a side income.
Disclaimer – The article is for informative purposes. Trading involves high financial risk and you may incur losses if you don’t have technical knowledge of the currency markets. Always trade with spare money that doesn’t affect your life even if you lose the entire investment amount.
5 Types of Trading to Earn Money Online in India
#1. Stock Trading
Stock trading is buying stocks for a short period of a few minutes to a few hours and selling on the same day to book profit.
You don’t have to focus on the fundamentals of a stock company, rather you learn to understand how the market behaves.
To learn the right time to enter and exit in stock to earn money at the end of the day.
Apart from buying first and then selling the stock for profit, you can also sell the stock first if you know the price of that stock would fall further from the current price and buy later to book profit.
This is called shorting of stocks.
Some stock prices keep on fluctuating heavily on a daily basis, also called Volatile stocks such as Reliance.
These stocks give you a better opportunity to make a profit from day trading.
Look at the snapshot below, if you buy 100 reliance shares at a price of Rs. 2379 per share at 11.35 am and sell at Rs. 2385 at 11.50 am, you will make a profit of Rs. 600 within 15 minutes.
Now if you do similar 4 to 5 trades in a day, you can easily make a profit of around Rs. 1,500 to Rs. 2,000 on average if everything goes in your favor.
But Remember, you may even lose your money as the market trends may change at any time.
#2. Forex Trading
Forex trading means trading different currency pairs and make money from the price fluctuations between currencies rates.
For example, you can trade in USD/INR and make money in the price movement between both currencies. Indian brokers offer trading in 4 currencies with INR or cross pairs only (as per RBI guidelines) –
You can trade in the pairs as mentioned below –
However, you can create an account with global forex trading companies like NordFX that allows you to trade in 33 Forex currency pairs around the world.
#3. Commodity Trading
The best part of commodity trading is that you can trade in the commodities market after returning from work because the commodity markets start at 9:00 am and remain open till 11:30 pm (unlike stock markets that close at 3.30 pm).
A commodity is a group of assets or raw materials used in everyday life such as grains, natural gas, or metals like gold and silver.
You can buy or sell commodities on a commodity exchange, similar to how you trade shares on a stock exchange. The most popular commodity exchange in India is Multi Commodity Exchange aka MCX.
You have more than 100 commodities to trade which are classified into four types-
- Metals – Silver, Gold, Platinum, and Copper
- Energy – Crude oil, Natural gas, Gasoline, and Heating oil
- Agriculture – Corn, Beans, Rice, Wheat, etc.,
- Livestock and Meat – Eggs, Pork, Cattle, etc.,
You can trade commodities through futures contracts. A futures contract is an agreement to buy or sell a specific quantity of a commodity at a set price at a later time (in the future).
The buyer has the responsibility to buy and receive the underlying commodity when the contract expires. Whereas, the seller commits to deliver the underlying commodity at the contract expiration date.
But in India, most commodities are traded in cash without physical delivery. But you still have the option to get delivery of the commodity but you can ensure the quality of a commodity as it’s not analyzed in the commodity market.
Futures contracts prevent the price volatility of commodity prices because they lower the unforeseen costs of purchasing an asset outright.
No doubt there are high chances of making huge profits in commodity trading but it involves a high amount of risk if not traded with proper understanding.
If you want to trade in commodities in foreign markets, you can trade in popular metals or raw materials like gold, silver, and natural gas via NordFX.
You can trade in gold and silver as insurance assets to hedge risks while trading in highly speculative assets like crude oil.
#4. Cryptocurrency Trading
While above-discussed trading types have fixed trading hours decided by regulating institutions. But that’s not the case with cryptocurrency trading as the prices are live 24×7 because cryptos are decentralized currencies and are not controlled by any Institution.
You can speculate on price movements of various cryptocurrencies like bitcoins, ethereum, dogecoin via any crypto exchange like NordFX.
NordFX allows you to trade in 11 cryptocurrency pairs against the US dollar from which major pairs are –
- BTC/USD (Bitcoin)
- ETH/USD (Ethereum)
- LTH/USD (Litecoin)
- EOS/USD (Eos)
- XRP/USD (Ripple)
You can also download their mobile app to do trading on the go.
Another crypto exchange CoinDCX offers you 10x margin leverage to trade in underlying coins. For example, if you have deposited Rs. 10,000, you’ll be eligible to trade crypto coins up to Rs. 1 lakh.
Because the high volatility of cryptocurrencies makes them a very lucrative place for traders but that may also lead to a huge loss if you are not an experienced trader.
#5. Options Trading
The concept of options trade is a little more complex than other discussed trading types. In options trading, you don’t have to pay the full price for the asset, but you can yield big profits if the price of the stocks goes higher.
And, you can also protect your money from losing if the price of the asset goes down, called hedging.
You can do options trading in multiple assets such as stock, commodities, forex, and indices.
There are Two Types of Options
- Call Option – Right to buy an asset in options trading
- Put Option – Right to sell an asset in options trading
Let’s understand in detail.
Options Trading gives you the right (without any obligation) to buy or sell any asset (stock, commodity) at a pre-determined price during a certain period of time or on a specific date.
Options trading is also called Derivatives because the contracts derive their value from an underlying asset.
Let’s understand options trading through the example below.
You come to know about the new metro project going to finalize in the outskirt of your city. You want to buy land worth Rs. 40 Lakh in that locality. You know the Metro project will increase the land prices in that area.
But, if that project doesn’t start then the hype may come down and the land price could be reduced to Rs. 35 Lakh.
You want to buy the land but are not interested in paying more money. The landowner gives you an option to pay a down-payment of Rs. 1 lakh (premium) for 6 months and he wouldn’t sell the land to any other customer.
Now you have the right to buy that land at Rs. 40 Lakh (current striking price).
If the Metro project begins and the land prices rise to Rs. 50 Lakhs, then you will get the benefit of using the right to buy the land.
But on the other hand, if the price falls to Rs. 35 Lakhs then you won’t have to buy the land (obligation), but you’ll only lose the down-payment of Rs. 1 lakh.
You have learned about all the trading types to earn money online, I would suggest you learn the technical analysis and deep understanding of how different markets work before diving into the ocean of trading.
Start small, keep on learning, and experimenting with your strategies to get better outcomes without losing big fortunes.