While trading can be an opportunity to make money, it also comes with risks. The markets fluctuate continuously and depend on many variables, so it is difficult to accurately predict how prices will move, without knowing how trading works.
What is trading?
Before we start explaining how trading works, let’s go over what trading is in case you skipped class. Trading is a form of investment that offers the opportunity to obtain profits thanks to the fluctuation of the price of a financial asset. These financial assets that we talk about so much can be: stocks (the best known), futures, cryptocurrencies, currencies and even indices.
Those who decide to do this type of operation do so through a broker, where they buy and sell these assets, and can study the progress of prices through their graphs.
How trading works
As we have told you, trading is an investment strategy in the short or medium term in which you buy and sell different financial products. The objective is to obtain a profit thanks to speculation and fluctuations in the price of assets. But why does this happen?
Asset prices move in the markets as a result of their supply and demand, with two main emotions: bullish and bearish.
A market bullish it is in which the majority of its participants move prices positively, increasing the value of the asset, due to high demand and low supply, due to good news from the company. Instead, a market bass guitarist it is in which its members work to lower the price of the asset, either because they want to buy in the future at a better price, because there has been bad news, and more supply than demand is caused.
These ups and downs are also conditioned by two factors that you should be aware of: volume and volatility.
The volume is the number of assets being traded at a given time. An asset with little volume shows that there is little interest from investors, so selling an asset at a value that interests you may be more difficult.
On the other hand, the volatility is the probability that an asset will experience significant changes in its value in a short period of time.
Once you have decided to invest in an asset, the brokers They offer you the possibility to do it through their platform, including stocks, futures and options. For example, if you want to sell Apple stock because you think the price is going to go down, the broker would pick up your sell orders. By doing this you will collect your profits, and the broker their commissions.
The risks of trading
One of the main risks is “risking” money that you need, on something that you do not understand very well. If you are thinking of starting to invest, it is good that you know it thoroughly and have good training so that your decisions are good and you put yourself at risk as little as possible.
And finally, we want to remind you that you can learn to order and structure the market with the Download Trading Platforms Masterclasses, with 40 financial training sessions full of quality training, which will help you order and structure the market with a head.
We hope we have helped you and, may the market be with you!