Do you often hear about trading? Have you also heard of someone making a huge profit through trading? With the advent of the internet, there are many who have picked up trading skills online. There are also many traders who have successfully made huge profits by trading stocks or cryptocurrencies. As such, there is a growing number of people who are now interested in trading. However, before you start trading, you should understand the meaning of trading and the different types of trading.
What is trading?
Trading is an activity carried out in the financial market with the aim of making a profit through the process of buying and selling assets such as stocks, foreign currencies (Forex), and crypto. When you trade in the crypto market, the asset being traded is a crypto asset.
To explain in detail, trading is an economic concept that includes the buying and selling of assets in the form of goods or services. This is done with the compensation paid by the buyer to the seller or service provider. Buyers will buy goods at low prices and sell them when prices increase. The difference in the selling price will be the profit obtained.
There are many who are interested in trading as it is something that enables them to earn huge profits. However, to be able to make good profits, traders need to be able to read the market and price patterns to predict future prices and make the right buying and selling decisions. This requires an adequate understanding of market conditions and the ability to read chart movements.
Types of Trading
If you are interested in trading, you need to understand the different types of trading. This can help you to determine which assets are suitable for you to trade. Here are some types of trading that you can learn.
- Forex Trading
Forex trading refers to the trading of foreign currencies. The profit is calculated from the difference in the exchange rate of foreign currency with the currency we use. For example, if you buy or exchange 100 USD dollars when the price is IDR 10,000/dollar and you resell it when the price goes up to Rp.15,000/dollar. The profit obtained is the difference in IDR multiplied by the number of dollars, which is 5000×100. The result is a profit of IDR 500,000. Forex trading is touted as a type of trading that can generate huge profits in a short time period but at high risk. There are many individual traders as well as official and non-official institutions who are trading in the forex market.
- Stock Trading
Stock trading is an activity of buying and selling shares in the short term. This is different from stock investment which usually has a long term horizon. Stock trading is usually done by buying and selling stocks based on fluctuations in stock prices in the short term. The assets used here are shares of a public company that are sold to the public through a trading exchange intermediary. To make a profit, you have to make the right trading decisions using technical analysis.
- Crypto Trading
Crypto trading is currently very popular amongst traders. Trading of crypto assets is increasingly popular as crypto assets are becoming recognized. This started with Bitcoin which has been accepted as a payment instrument in several countries and with its value increasing exponentially. The prices of crypto assets can often grow by 100% hence the profits that crypto traders can potentially earn is also very high. However, trading of crypto assets is classified as high risk because the prices are very volatile. Therefore, traders have to understand the market well and check for the market movements regularly to avoid big losses.
The advantage and disadvantages of trading
Here are some of the advantages and disadvantages of trading:
- Flexible and Practical
With the development of the internet, trading can now be done anywhere and at any time as long as an internet connection is available. You can do it while still holding a full-time job or while on vacation. You can make this activity a side job to earn extra income. In addition, auto trading technology makes it easier for you to trade without the need to pay close attention to the price fluctuations. Your assets can be sold automatically based on the price parameters you have set.
- You can start trading using a small capital
If you are not confident to trade a large amount of capital, you can start with small capital first. In forex trading, there is a margin and leverage system service where you can get a certain amount of borrowed funds from a broker. In this case, even with limited funds, you can start trading.
- Low cost
Even when trading with a small capital, you can also do so with a low service fee. Some online brokers provide trading features with free account registration and affordable service fees.
Risk of trading
With high profits, usually, the accompanying risks are quite high. Any type of trading carries its own risks and you need to do it with calculation and caution. For example, there are some brokers that require you to make a large amount of deposit. You may be tempted to do so because the returns are higher. However, the risk is very high and there is potential you will lose a huge amount of capital if you make the wrong decision.
There are many people who have been deceived into registering with a broker which are in actual fact, frauds. There are many online brokers available, therefore, make sure you do a background check before selecting a broker.
If you are interested in trading crypto, one of the secure and legal brokers registered under the Financial Services and Security Act 2010 (LFSSA) is Tokenomy. On Tokenomy, you can trade major crypto assets like Bitcoin, Ethereum. Of course, if you are a beginner and are not ready to trade, you can also invest in crypto deposits with an interest rate of up to 7% in a year. What are you waiting for? Register now on Tokenomy!