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Various types of Market Participants

Various types of Market Participants

The stock market consists of several investors that keep it functional. Who are these people and what role do they play in the market? Watch our engaging and easy-to-understand video from the #LearnWithUpstox series to learn more about market participants, their various types, and their varied roles in the market.

Hello and welcome to our educational series - Learn with Upstox.

Here you’ll find theories - from the easiest to the hardest investment concepts, explained in a simple yet practical manner.

In this article - Let’s talk about the various types of participants in the stock market.

Three Types of Market Participants

Basically, there are three categories of participants in the market. 

  • Retail Traders - people like you and me
  • High Net Worth Individuals/ Investors - whom we refer to as the HNI clients
  • Institutions - or companies like LIC, Aditya Birla Group etc.

Now, let’s define them all, starting with Retail Traders.

Retail Traders

Retail traders are people like you and me who invest from our homes, using our laptops, judging the market from the news or by using different services. These are traders who invest individually.


High Net Worth Investors

The second are the High Net worth Investors who deploy big sums of capital. These are people who study better and go deeper into technical analysis, have better fundamentals and have access to better information. They invest in crores of rupees.


Institutional investors

This third category of Institutional investors, the big companies are of two kinds.                                       

  1. Foreign Institutional Investors - or the FII. These are companies outside of India.
  2. Domestic Institutional Investors - or DII. 

There could be many foreign companies like the Canada Pension Fund, government companies or Mutual Funds or AMCs. These companies invest in our stock market. Even companies outside of India. Similarly, there is also LIC, which everyone knows is the biggest Domestic Institutional Institution of India. 

Now that we discussed all these types of participants, which participant do you think is the most important?

You might think that it's the Retail participants, but that’s not true. You might think so because of our mighty population, but the truth is that very few people have awareness about the stock market in India. In fact, only 4% of Indians invest in the stock market. 

Well, what matters is which one of the three is the most important?

And the answer is the third one. Institutional investors are the most significant market participants. These Institutions invest so much money that the market moves because of them. 

Now, let’s move on to:

Types of Trading

  1. Intraday Trading: The first category is Intraday Trading, when you trade from 9 am in the morning to 3pm. These trades are not carried forward to the next day and are finished on the same day itself even if you make profits or losses. 
  2. Mid-Term/ Swing Trading: This second type of Mid term trading is called swing trading or even positional trading. This is done when you buy a share and hold your position for anywhere from two days to one year. It could be for three days, a week, five months or a year. But if you hold it for that long then it would be called Positional as there are two categories - Swing and Positional. The only difference is whether you rapidly swing or hold your position for some time.
  3.  Investing: When you take a position in a stock and hold it for long periods of time it is called Investing. This is a long term approach and involves holding a share for more than one year.

Qualities of a good investor

There are two qualities that a good investor should have:

  1. Capital
  2. Nature of the person.

It matters obviously, how much money you have and can invest but it is also important what your nature is like - are you aggressive? Are you calm? Do you panic in stressful situations? 

Basically, if you’re not calm and panic in stressful situations, then you can’t really invest. For example, now, when the covid pandemic struck, it affected our entire system and the market fell rapidly. The people who had bought or couldn’t sell their shares had a hard time but now, one year later the market has almost doubled. And these people could benefit because they invested long term and didn’t panic.

So you need three things to invest:

  1. Good or recurring capital
  2. Being Calm
  3. Not panicking 

When it comes to swing trading, it’s fine if you have a little less of capital and a little less of patience. Mid-term/ Swing/ Positional trading also requires capital and patience but with some leverage. 

When it comes to Intraday trading, you get two types of choices:

  • Intraday
  • Delivery

When you choose Delivery, and if a stock costs Rs 100 then you have to pay Rs 100. When you choose Intraday, you get some margin or leverage which is like a single day loan. Say, you have Rs 10,000 in your account. They can say, take Rs 30,000 and use it for investment, but you have to sell no matter what by 3:15 pm the same day. This is Intraday trading when you can get the benefit of leverage. 

In this, you can have relatively less capital and patience. 

Screen Time

Screen time is the amount of time you have to sit in front of a laptop or screen, which time frame to use, for how long etc. 

In long term investing, there is relatively less screen time. In fact, you need very little screen time before your time frame gets over.

Swing trading also requires less screen time and is usually preferred by professionals or people with jobs.

Intraday trading on the other hand, requires the most screen time. I’d not recommend this to anybody who can’t give a lot of screen time and commitment. Only people who can give screen time and constantly study the market should do intraday trading.

And that is all for today. If you want to read more about investments, feel free to browse through our blog as we have an entire series dedicated to this. You could also check out our YouTube channel.

Thank you and have a good day!