Trading vs Investing & Styles

Q1. (4 marks) — Trading vs investing mindset Any two valid contrasts (2 marks each):

• Time horizon: Trading = short-term (seconds to weeks); Investing = long-term (years). Why: traders profit from price fluctuations, investors from business growth/compounding.
• Basis of decision: Trading relies on technical analysis/price action; Investing relies on fundamental analysis (earnings, valuation).
• Profit source: Trading = capital gains from volatility; Investing = capital appreciation + dividends.
• Activity/monitoring: Trading requires active, frequent monitoring; Investing is passive/periodic. (1 mark for naming the axis, 1 mark for correct contrast.)

Q2. (3 marks) — Scalping

• Definition: Making many small trades to capture tiny price movements. (1)
• Holding period: seconds to a few minutes. (1)
• Demand: extreme focus/fast execution/high discipline/low latency & liquidity. (1)

Q3. (3 marks) — Intraday / day trading

• Definition: Buying and selling within the same trading day to profit from intraday moves. (2)
• Rule: all positions must be squared off (closed) before market close — no overnight holding. (1)

Q4. (3 marks) — Swing trading

• Definition: Capturing price "swings" over the short-to-medium term using technical setups. (2)
• Timeframe: typically a few days to a few weeks. (1)

Q5. (4 marks) — Momentum vs mean-reversion

• Momentum: buying assets that are rising and continuing to rise (trend continuation) — "buy high, sell higher." (2)
• Mean-reversion: buying when price is abnormally low / selling when abnormally high, expecting return to average. (2)

Q6. (3 marks) — Positional / trend trading

• Definition: Holding a position to ride a major/long-term trend, ignoring minor fluctuations. (2)
• Holding period: weeks to months (sometimes longer). (1)

Q7. (4 marks) — Matching (1 mark each)

• Scalping → (d) constant screen focus
• Intraday → (c) full trading session
• Swing → (b) 1–2 hrs/day (check-ins)
• Positional → (a) a few minutes/week

Q8. (4 marks) — Scalper P/L

• Wins = 60% × 20 = 12 trades; Losses = 8 trades. (1)
• Profit from wins = 12 × 150 = ₹1,800. (1)
• Loss from losses = 8 × 100 = ₹800. (1)
• Net = 1,800 − 800 = ₹1,000 profit. (1)

Q9. (4 marks) — Compounding

• Formula: $A = P(1+r)^n$. (1)
• $A = 100000 \times (1.12)^2$. (1)
• $(1.12)^2 = 1.2544$. (1)
• $A = ₹1,25,440.$ (1)

Q10. (4 marks) — Swing return

• (a) Return $= \dfrac{560-500}{500} \times 100 = \dfrac{60}{500}\times100 = 12\%$. (2)
• (b) The 12% was earned in only 8 days, whereas an investor's 12% is over a full year; annualising the swing return gives a far larger (but unrealistic to sustain) figure — different timeframes make direct comparison misleading. (2)

Q11. (4 marks) — Personality/lifestyle factors (2 each) Any two, e.g.:

• Available time: full-time job → swing/positional (can't watch screen all day). (2)
• Emotional temperament / risk tolerance: impatient/high-stress tolerance → scalping/intraday; patient → positional/investing. (2)
• Capital available: small capital may limit certain styles.
• Attention span/discipline: scalping demands split-second discipline.

[
  {"claim":"Q8: net P/L = 1000", "code":"wins=0.6*20; losses=20-wins; net=wins*150-losses*100; result=(net==1000)"},
  {"claim":"Q9: compound value = 125440", "code":"A=100000*(1+Rational(12,100))**2; result=(A==125440)"},
  {"claim":"Q10a: swing return = 12 percent", "code":"r=(560-500)/500*100; result=(r==12)"},
  {"claim":"Q7 count: four styles matched", "code":"m={'scalp':'d','intra':'c','swing':'b','pos':'a'}; result=(len(m)==4 and len(set(m.values()))==4)"}
]