Category: What is Trading ?

The difference between trading and investing lies in the means of making a profit and whether you take ownership of the asset. Traders attempt to profit from buying low and selling high (going long) or selling high and buying low (going short), usually over the short or medium term.

Investors will also attempt to profit Investors will also attempt to profit from buying shares at a low price and selling high, but over a longer term. They may also aim to earn income in the form of a dividend.

In financial markets, millions of companies, individuals, institutions and even governments are all trading at the same time. But what is a trader? A trader is defined as a person who buys and sells financial instruments with the aim of making a profit.

Some traders stick to a particular instrument or asset class, while others have more diverse portfolios. Some do lots of research before placing a trade, while others read charts and watch out for trends.

But trades all have one thing in common – they all carry risk. Risk is a key concept to all types of financial trading. No matter what instrument is being traded, who’s trading it or where the trade takes place, balancing potential profit against risk is key to a successful trading strategy.

No matter what instrument is being traded, who’s trading it or where the trade takes place, balancing potential profit against risk is key to a successful trading strategy.

Further, you need to do a comprehensive analysis of the market you want to trade. There are two types of analysis:

Fundamental analysis

 is concerned with all the factors of a company that could have an impact on the stock price of the company in the future. These include financial statements, management processes, and more. The fundamental value of the firm to spot whether the stock is reasonably priced or not is the main objective.

Technical analysis

 focuses on the study of financial charts – and using indicators and other tools to identify possible future trends.

A trader is a person who gets involved in buying and selling of a financial asset in any financial market. He or she can buy or sell either for himself/herself or on behalf of another individual or institution. The main difference between an investor and a trader is the duration for which he or she holds on to the asset.

A trader is a person who engages in the short-term purchasing and selling of an equity either for an institution or for themselves. The disadvantages of trading include – capital gains taxes which is applicable to trades and the expenses of paying brokers in the form of multiple commission rates.

Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. Trade can take place within an economy between producers and consumers. International trade allows countries to expand markets for both goods and services that otherwise may not have been available.

It is the reason why an American consumer can pick between a Japanese, German, or American car. As a result of international trade, the market contains greater competition and therefore, more competitive prices, which brings a cheaper product home to the consumer.

In financial markets, trading refers to the buying and selling of securities, such as the purchase of stock on the floor of the New York Stock Exchange (NYSE).

KEY TAKEAWAYS

• Trade broadly refers to the exchange of goods and services, most often in return for money.
• Trade may take place within a country, or between trading nations. For international trade, the theory of comparative advantage predicts that trade is beneficial to all parties, although critics argue that in reality, it leads to stratification among countries.
• Economists advocate for free trade between nations, but protectionism such as tariffs may present themselves due to political motives, for instance with “trade wars.”