Trading is the activity of making money in the asset market. However, what are the basic concepts of trading like? And what assets are the objects of trading?
What is Trading?
Trading is the activity of buying and selling assets in the financial markets with the aim of making a profit. In this activity, all actors, both sellers and buyers, make transactions voluntarily based on price movements that occur in the market.
You may associate trading with stocks. However, in addition, there are also other types of assets that are the object of trading, including foreign exchange, debt securities, and crypto assets.
Traders, or traders, generally make a profit if they manage to sell their assets at a higher selling price than the buying price. And vice versa. He will suffer losses if he sells his assets at a price lower than his purchase price.
The basic concept of changing the price of the asset is a change in demand-supply in the market. The more asset demand, assuming ceteris paribus, the higher the asset price should be. And vice versa.
Well, since the profits and losses are based on fluctuations in the price of an asset, trading is a risky activity. The implication is that traders must implement a trading plan, risk mitigation, and prepare a mature strategy before doing so.
Is Trading the Same Thing as Investing?
Although both involve the process of buying and selling assets, trading cannot be called an investment. The fundamental difference is the purpose of the activity.
An active trader trades in the market with the aim of raking in a large profit margin. Meanwhile, investing itself is a way for a person to achieve their financial goals in the future.
Therefore, the intensity of buying and selling assets of traders may be faster than investors.
In addition, another difference lies in the analytical science used,
Traders rely on technical analysis skills to determine the best momentum when buying and selling in order to obtain optimal margins. On the other hand, investors are more inclined to use fundamental analysis when determining their investment decisions.
This is because both rely on these analyses for different purposes.
On the one hand, traders use their analytical science to determine the right momentum in buying and selling assets that can provide qualified profits. But on the other hand, investors use their analysis to select potential assets that can provide better returns in the long term.
What are the Trader’s Styles When Trading?
Trading style relates to the length of the period a trader holds an asset while trading. In general, there are four types of trading styles, namely;
1. Position Trader
Position traders can hold asset holdings for several months to years until the asset price reaches the target position.
2. Swing Trader
Swing Traders only need a few days to weeks from buying to reselling their asset holdings.
3. Day Trader
Day traders buy and sell the same asset over a period of a day. A trader with this style does not keep assets in his portfolio until the next day. In fact, before the market closes, Day Trader has sold all of his asset holdings.
4. Scalp Trader
Scalp traders can earn profit margins from buying and selling in seconds to minutes. Traders must have analytical power, good response, a healthy psychology and of course a responsive broker to be able to carry out effective scalp trading.
What are the Types of Trading Assets?
There are several types of trading that you can do based on the asset market of your choice, including stock traders, foreign exchange traders, future traders, and cryptocurrency traders.
1. Stock Trading
Stock traders or stock traders carry out their buying and selling activities on the stock market. The strategy is to buy stocks when they are cheap and sell them when they go up. Then, the trader gets a margin from the difference in the buying and selling price of the stock.
Not only stocks, you can also buy other products such as indices in the market. Although it sounds simple, stock traders must be accurate in analyzing price patterns through technical analysis instruments as well as analyzing the fundamentals of the company and the economy as a whole.
2. Foreign Exchange Trading (Forex)
In addition to stocks, another popular instrument that is also the object of trading is foreign exchange. In this activity, traders will compare one currency with another and see the movement of the exchange rate between times.
The strategy is the same, namely by buying foreign exchange when the exchange rate is relatively cheap and then reselling it when the value is more expensive.
The foreign currency pairs of the two countries that are the object of trading continue to fluctuate throughout the 24 hours of the day. In addition, currencies are often influenced by geopolitical issues and global economic developments. Hence, becoming a forex trader requires good skills and endurance in addition to sufficient analytical power and knowledge.
3. Futures Trading
Futures market trading is synonymous with commodities as the object of its transactions. One of the most popular commodities is gold.
In this activity, traders earn money from the margin of the commodity futures contract being traded.
Not only must traders understand the content of the contract, but they must also master the factors that affect the demand and supply of a commodity. For example, currency exchange rates and global economic conditions that greatly affect gold prices.
4. Crypto Asset Trading
Crypto assets are a trading instrument that has only been popular for the last decade. In this market, traders can profit from the increase in the price of crypto assets and make a profit if the price of the crypto asset slopes.
However, the crypto market has the prestige of being the most volatile market in the world. The price can go up and down very quickly and the market is active 24 hours a day. So, with the right strategy, the perpetrator can pocket jumbo money. However, if the apes are not detected, then the trader can end up getting a nightmare because he can get big losses.
However, no matter what type of asset you trade, you must have qualified preparation, strategy, and knowledge, Kidktv friends!
