When you want to make money in financial markets, there are two major ways to do it. You can invest or you can trade. Investing plays out on a longer timeline of years and decades, while trading is focused on months, weeks, days or even hours. Financial trading is tough and intense business and it takes a long time to learn how to do well. You need risk management skills, acumen at reading and disseminated through news of a financial nature and the ability to work with numbers and spreadsheets.
When you make the call to get into financial trading, you want to educate yourself. Build yourself a trading library, so you can be no more than an arm’s length away from viable and expansive tomes on the nuances of making money in the markets. Being an autodidactic learner is extremely profitable in this particular situation. Being able to learn on your own, without subjecting yourself to a class or coursework is valuable.
What is financial trading? It is the act of buying a stock, bond, commodity or other financial instrument in the hopes of the asset rising in value. You are a hedger, a speculator and a bettor. You are looking to gain insight and knowledge into the markets and then use that to make a profit. Traders are interpreters of information, with the work done a move towards making more money than you started with.
You need to be well versed in whatever financial instrument you are planning to trade. If you want to trade stocks, you want to be able to understand what a stock is and how you can project its value. A stock represents a piece of a company or corporation that is bought and sold on an exchange. Companies issue shares so that they can raise money to do their business. If you think the company is well run or poised to grow, you can buy a certain amount of stock and sit on it as in an investment. That is what many people do.
Other people, known as traders, buy and sell shares very quickly, in order to make a profit off of short term spikes in the price of the shares. It can be a day trading situation or a swing trading situation, where a trader holds a stock for a longer period of time. Financial trading is generally thought of as a much more active pursuit than other investment activity. That means always being on and being engaged with the markets. You can employ tools to keep your accounts in check when you need a break from the screen time, but it is an intense job.
Beyond stocks, traders can operate in derivatives and commodity markets. Derivatives, such as spread betting, options, contracts for difference and futures, to name a few, are derived from actual financial assets. When you are trading derivatives, you do not actually take ownership of the underlying asset. You are just speculating on the value of that asset. It can be riskier than some other types of trading, if it is not done with caution.
The commodity market is somewhat similar, because you are essential trading contracts for the actual goods, such as coffee or cocoa, so you are not owning the goods. But it is a very specific type of derivative. Commodity markets have been around for most of human history, predating even the most rudimentary stock market exchanges.
For more tips on financial trading and risk management, look to this resource for picking the right platform that will match your risk appetite and strategy.