Must Knows

What is stock trading?

[ecis2016.org] Trading is the buying and selling of financial instruments to make a profit. 

Trading is the buying and selling of financial instruments to make a profit. These instruments range from a variety of assets that are assigned a financial value. Individuals aim to buy shares at a favourable price and take outright ownership of the stock. They make a profit from holding the stock and selling it at a higher premium. 

Exchange is an essential monetary idea that includes the trading of wares and administrations, alongside a fee paid by a purchaser to a dealer. 

Difference between stock trading and stock investing

Trading: A trader makes a profit from buying low and selling high (going long) or selling high and buying low (going short), usually over the short or medium term. Traders prefer to make use of leverage and derivatives to go long or short on a range of markets. Retail traders, institutes, or governments participate in financial markets, intending to make short-term profits.

Investors: Individuals who buy a share at a favourable price and take outright ownership of the stocks are called investors. They make a profit from holding the stock and selling it at a higher premium. Investors could also earn income in the form of dividends if the company grants them. They will have shareholders voting rights. 

Advantages and disadvantages of trading

Advantages

  • It is an easy way to save and grow money.
  • An investor can earn extra money through dividends.
  • It has a democratic process; the market decides the share prices.
  • You can acquire the assets at the lowest rate possible.
  • A trade involves an exchange of commodities and services, mostly in return for money.
  • A trade can happen within a country or amongst trading nations. The international markets can be beneficial for a trader, even though market pundits contend that it leads to stratification within countries. 
  • It allows free trade amongst nations, but protectionism like tariffs might present themselves because of political motives. 

Disadvantages

  • Lack of brokers advice
  • Online trading is risky
  • Loss can be real even if trading is virtual
  • Small commission can translate into huge expense
  • It is unpredictable 
  • Forced dynamics
  • Cooperation among countries
  • Growth in emerging markets
  • Technology sharing
  • Liberalisation of cross-border movements

Source: https://ecis2016.org/.
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Debora Berti

Università degli Studi di Firenze, IT

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