How trading works

How trading works

January 14, 2022
6 days ago

How trading works.

While trading can be an opportunity to make money, it also has its risks. 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 review what trading is in case you skipped class. Trading is a form of investment that offers the opportunity to profit from the fluctuation of the price of a financial asset. These financial assets we are talking about can be: stocks (the most known), futures, cryptocurrencies, currencies and even indices.

Those who decide to make this type of operations, do it 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 a short or medium term investment strategy in which you buy and sell different financial products. The objective is to make a profit through speculation and fluctuations in asset prices, but why does this happen?

Asset prices move in the markets as a result of supply and demand, with two main emotions: bullish and bearish.

A bull market is one in which the majority of its participants move prices in a positive direction, increasing the value of the asset, due to high demand and low supply, because of good news from the company. On the other hand, a bearish market is one 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, or because there has been bad news, causing more supply than demand.

These rises and falls are also conditioned by two factors that you should be aware of: volume and volatility.

Volume is the number of assets being traded at any given time. An asset with low volume shows that there is little investor interest, so selling an asset at a value you are interested in may be more difficult.

On the other hand, volatility is the probability that an asset will experience significant changes in value over a short period of time.

Once you have decided to take the plunge and invest in an asset, brokers offer you the possibility to do so through their platform, including stocks, futures and options. For example, if you want to sell Apple shares because you think the price is going to go down, the broker would pick up your sell orders. In doing so, you would collect your profits, and the broker would collect its commissions.

The risks of trading One of the main risks is "risking" money you need, on something you don't understand very well. If you are thinking of starting to invest, it is good that you know it thoroughly and have a good training so that your decisions are good and you put yourself at risk as little as possible.

And finally, we would like to remind you that you can learn to order and structure the market with Canal Trader's Masterclasses, with 40 financial training sessions full of quality training, which will help you to order and structure the market wisely.

We hope we have helped you, and may the market be with you!

Canal Trader.

Translated with www.DeepL.com/Translator (free version)

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