trading
Finance

What is financial trading?

Although an old term, financial trading is really no different to any other form of trading. Simply put its about buying and selling assets with a view of making a profit. There are a number of ways you can get into financial trading. If you’re looking at getting started, you’ll need to know firstly, if you can trade and what you can trade. 

What exactly is it?

Financial trading is the buying and selling of financial assets. You can do this via an exchange or over the counter. An exchange is a marketplace where you can trade a specific type of instrument, for example, you can trade UK shares on the London Stock Exchange. When you trade over the counter (OTC), the trade is made directly between two parties. This could be buying a contract from a trading broker for example. 

Who can trade?

In the sea of financial markets you’ll find millions of companies, individuals and even governments, all trading at the same time. By definition, a trader is a person who buys and sells financial instruments with the aim of making profit. 

Some traders stay with a particular instrument or asset class, while others have more diverse portfolios. The way you trade also differs from person to person. Some do extensive research before even think about placing a trade, while others read charts and watch out for trends. 

What markets can I trade?

There are literally, thousands of different financial markets you can trade in. Everything from shares and indices to cryptocurrencies and forex. No matter the instrument being traded, the outcome is always the same – to make profit. 

Also out there are exciting new markets to trade in. These range from digital 100s and interest rates to sectors and bonds. Wherever you want to try and turn a profit, you’re likely to find the perfect market for you among the wide variety on offer.

What about forex? Is it any different?

Foreign currency and exchange is the process of changing one currency into another – unlike stock trading which is dealing with different financial assets and instruments. Because of its worldwide reach of trade, commerce and finance, the forex market tends to be the largest and most liquid asset markets in the world!

Deciding whether to invest in the forex market or stock market depends on the traders risk tolerance and trading style. Both are suited to different people. If you’re a short-term trader, you may prefer trading in the foreign exchange market as the price volatility is more pronounced and it’s often much faster paced. 

If you’re looking to dip your toe in to the forex pool, there are a number of trading platforms out there such as Tickmill, which will give you an insight into what the market is like. 

Is investing the same as trading?

Simply put, no. They are two very different ways to try and make a profit in the financial markets. Investors tend to seek a larger return over a longer period of time through buying and holding. Traders on the other hand, take advantage of the rising and falling markets to make smaller but more frequent profits. 

Depending on what your overall financial goals are, will decide which route you would look to take. But before you venture into either, make sure you do extensive research to see which you’re best suited to.