When most people think of the financial markets, images of crowded trading rooms will be conjured up. Dozens of investors will be waving paper and shouting across the room, with towering computer screens displaying rows upon rows of flashing numbers. In reality however, financial trading isn’t anything like this anymore. There are an increasing number of people around the world who trade from home or office; there’s no need to visit a trading room because everything is internet-based.
There are many different forms of financial trading, and things can get extremely complex. In short, everything revolves around speculation, which means that people look to capitalise on the price movements of a financial asset. When they think that the value is going to rise, then they buy the asset, and when they believe the price will fall, they sell that asset. If they are correct, then they will have made a profit.
There are a huge number of financial instruments available, with three general categories that things might fall into. These are stocks and shares, commodities, and currency. Stocks in companies form the most widely known market; thought the largest is actually the foreign exchange (forex). Commodities include everything from oil to precious metals and farm goods.
Physically buying and selling assets is not actually the way most trades are carried out. There are any different products available that allow for differing styles of speculation. For example, spot forex trading is when you buy or sell a particular amount of a currency, but traders commonly exchange futures or options, which are an asset based on the future value of a currency. Spread betting is another popular method in some countries, whereby traders wager a particular amount of money for each percentage point that a price moves up or down.
So how is all of this actually carried out? It’s far simpler than you may think, and as we’ve already mentioned, almost everything takes place online. In theory, you don’t ever have to leave your desk to trade. All of your actions are performed through a trading platform, which is an application that shows you what’s going on with the markets, and allows you to input trades. Behind this is a broker that handles all of the money. You’re free to open an account with whichever broker you choose.
While actually making a trade is very simple indeed, a considerable amount of work will go into ensuring that it is a successful one. Traders spend a long time looking at price charts and analysing economic announcements to decide which way prices are going to move. Financial trading is not gambling; all decisions are fully informed beforehand.
To conclude, financial trading is something that is now accessible to everyone. A forex account can be opened with as little as $200, but it’s important to remember that a lot of work will go into making a profit. If you’re interested, then there are plenty of internet resources available for you to learn more, and even demo accounts for you to try out.