Everyone has heard of trading, but what is it really? Trading is using money to buy something that hopefully becomes more valuable in the near future. Most people trade stocks, but there are a lot more possibilities and ways to trade than you would initially think.
5 reasons to trade
- Saving your money devalues your money, while trading makes you more money.
- Trading can also make you money when the prices go down.
- With trading you manage the risks; you never lose more money than you put in.
- Trading can be tried for free by using a demo.
- Trading is exciting, educational and you will get better over time.
Before we go into the how and what of trading, it’s wise to look at the reasons that people trade. Almost everyone knows that there are risks involved with trading and people love to make more money, but at as little risk as possible. Despite the risks, a lot of people decide to start trading. Aren’t they afraid to lose their money?
Most likely they are, but the alternative isn’t very attractive either. Due to inflation, the real value of everyone’s money gradually decreases, but through trading you can make more money. This is why more and more people are trying to trade, with or without the support of an investment fund or advisor.
Goal of trading
The goal of trading is to make money. Through traditional forms of trading you make money when the price of a stock goes up, but nowadays it’s also possible to make money when the price goes down. This option makes it very interesting to trade during bad economic times, but this also comes with ethical issues.
Trading isn’t gambling, but it isn’t an exact science either. By practicing you can become better at it. Especially in the short term, recognizing certain patterns and predicting movement is very important to learn and makes it possible to make money as a professional trader. In the long term the key data of a company is very important, but there are numerous factors to take into account in order to predict the further development of the price.
Do keep in mind that the price of a stock can never be predicted with 100% accuracy. Thus you should only trade with money you can afford to lose.
You now know what trading is and why people start trading. Are you up for it? With higher risk comes a higher potential reward; if you’re good at trading, you can make a lot of money. For beginning traders it is interesting to get started through an online broker since it’s not necessary to pay any commission. You can profit from low spreads and high leverage. You will find more information about all the possibilities of trading on our website.
Conclusion: what is trading?
To answer the question ‘what is trading?’ we can simply say that it’s the buying and/or selling of stock to make money. Trading is an interesting way to make your money work for you as opposed to putting it in a savings account. Nowadays anyone can trade, but it’s important to determine what you want to trade and to determine what the best broker is for you.