People who are faced with financial markets and exchangers have heard such a thing as trading, but not everyone knows what it means. Before the Internet began to develop actively, representatives of this profession were often mistaken for speculators. Now everything has changed. This article will tell you what trading is, what types it has, and who does it.
Trading is trading
Activities carried out with the goal of making good money. This kind of work is done by people on special exchanges. The participants in these trades are called traders. In most cases, people who have big money for investments play on such exchanges.
Who is involved in trading?
For example, a person has a good job or a successful business. He fully provides for his family, while he has “extra” funds that can be invested in some profitable business to increase their number. Give to the bank at interest? Now is the time that almost any bank can suddenly go bankrupt, which does not stimulate trusting such financial organizations in a crisis. Store at home in a safe? Invest in real estate? In movable property? Or maybe become an investor and entrust the management of your funds to competent people?
The essence of such trade
Trading is an activity, as a result of which you can multiply your financial resources many times over. Of course, there is a big risk of burnout if you choose the wrong professional to manage your money. A trader, in fact, is an ordinary trader. The one that buys cheaper and sells more expensive. But since trading is trading on the exchange, without direct agreement with the client, the task is somewhat more complicated. A trader needs to conduct a constant operational analysis of the value of a product, which today, according to forecasts, should sell well, find a way to invest as little money in this product as possible and get as much profit from sales as possible by the end of the specified period.
However, for those who are familiar with this concept, it is no longer a secret that trading is a job that has recently gained popularity on the net. Moreover, the Internet provides access to the exchange, which allows anyone to try themselves in this area.
A minute about the past
Previously, in the dashing nineties, Americans were mainly engaged in trading, and it was they who watched who gets to their market. In other words, access to a closed trading network could be obtained through brokers, who, in turn, opened it only at the request of customers and, naturally, for money. Of course, financial trading was incomprehensible to ordinary people. The necessary software was installed on the computer to individuals who now had access to a closed exchange, where everything happened. Agree, it’s hard to call something publicly available, but such networks were called online trading. Although it was only a conditional name.
Moreover, brokers were engaged in the trading itself. They managed to make money from investors who cared only that their free capital would not burn out, and invested their savings in the form of shares and securities in any projects. In other words, they sponsored someone’s business with the goal of making a profit or not losing their money due to inflation or a falling market. This operation was carried out by brokers, representing a gigantic network of mediation, in fact, it turned out that these brokers took payment for trading from investors.
Trade mechanism
The investor turns to the broker, offering him a certain amount of money for the fact that he will invest his capital in such a business that will bring him profit. The trader, in turn, is looking for a company or product in which it is profitable to invest in order to later extract the necessary profit, provide it to the customer and get his money for the work itself.
There is a reverse situation when a company is looking for an investor for development and offers a broker a certain amount for attracting such a person. It is clear here that the broker in those days managed to make a profit on both sides. And of course, they did not work with small market segments, private entrepreneurs, and small business representatives. It is noted that the broker's efficiency was reduced to zero when his profit from a long-term transaction was less than fifteen thousand dollars. That is, brokers played mostly big or were useless.
So there was a need for traders. They are able to invest their savings in any volume and in the goods that they consider necessary. The trader himself determines the time period in which he will trade, and he will take his profit. No mediation except the exchange itself.
Essential Skills
To become a successful trader, to begin with, a future trader needs to learn some theory and acquire a clear set of rules and patterns due to the exchange and the economic situation that has developed at a certain point in time.
So what does a trader need?
- Good theoretical background.
- Knowledge of the rules of trade.
- Understanding how the exchange itself works.
- The ability to plan.
- Accumulated capital.
- Constant analysis of transactions on the exchange.
- It is necessary to keep records and to note their mistakes.
- Develop new trading strategies.
- Draw conclusions.
Internet trading: what is its feature?
Nowadays, many exchanges have convenient access via the World Wide Web. This provides more effective monitoring of prices and turnover, opens up new opportunities for novice traders and simply colossal for veterans. Since the main tool of the trader is the analysis of the market and turnover, the Internet is the best environment for the qualitative collection of the necessary information and the rapid creation of charts necessary for the accurate determination of goods and prices. Analysis, in turn, is needed for the most profitable investment and the subsequent extraction of maximum profit. And only online trading is the ability to profit remotely and in the shortest possible time.
For example, if Europe is going to impose sanctions on the import of agricultural products into Russia tomorrow, then there will be a shortage of this product within Russia. What follows from this? And the fact that if a trader immediately invests in agricultural goods, the prices of which have not yet had time to soar, then tomorrow, when they have already risen, he will receive his profit. What did you have to do? Follow the news, enable logic, have free funds and quickly work on the exchange. That's all the work, and online trading is a universal tool, because it is on the network that effective trading has become possible, the complex procedures of which so scared early brokers before it existed online.
Types of Trading
There are several of them. We will analyze each of them in detail.
The first type is financial trading. This is a type of trading on the stock exchange, where they work exclusively with securities or stocks. Since the price is regulated by demand, it is not difficult for a competent trader to determine what is best to buy or sell at the moment. For example, if the demand for shares of one company is growing, it is clear that the price will rise soon, the main thing is to catch this connection. The trader takes everything into his own hands and buys as much as he can on credit at the current, not yet raised price. And it turns out that net profit will fall into his hands - the difference between tomorrow's and today's prices. So, he sold the shares, in fact, not having them. He simply relied on his analysis. He could lose and remain in debt. This is financial trading. Many, probably, have repeatedly seen films in which the detractors of certain brokers or traders deliberately, at a loss, “break” the forecasts of such traders in order to leave them in debt. Sometimes it happens.
The second type is high-frequency trading. This is a trading carried out by specialized computers that carry out millions of computational operations per second and, on the basis of these operations, independently carry out all securities purchase and sale transactions. Analysts say that this type of trading stabilizes the use of markets and reduces the cost of goods turnover. But this method has many disadvantages. High-frequency trading is focused on short-term, even second-hand operations, which generate so little profit and work on small commodity circulation that this more than once led to a collapse of markets.
The third type is Forex trading or playing in the foreign exchange market. After America moved away from a stable change in the currency in price, it became possible to earn good money on it. Indeed, its cost can “float” in the range of four percent during the day. Then the world community under the general guise and created an international monetary system, with which it became possible to earn money on the money itself. Nothing complicated. You know that if you had a bunch of dollars a year ago, you would have surely sold them now when they cost twice as much. Traders also know this. Moreover, they can make money on it for several seconds by betting on a certain currency, based on their assumptions that the demand for this currency is about to rise, and it will rise in price, after which it can be sold profitably. Therefore, today Forex trading is a powerful system for earning many Internet users and people who trust them to manage their money to make a profit.
Conclusion
Summarize. Trading is the use of the exchange, all available resources and knowledge in order to buy and sell profitably. At the same time, it does not matter at all what and by whom the person or computer will be bought. The main thing in this business is profit.