These days, you can trade anything online. Whether it is currencies, stocks, bonds, options or futures, the financial instruments that one can trade in an online platform are many. The most common item that grabs traders are stocks, because they are the simplest to grasp. A stock is a small share of a corporation. You can buy a large amount or a small amount. And you can speculate on the price of an asset.
You don’t have be part of a Wall Street firm or work in a stockbroker’s office to have access to all these opportunities. Online trading is open to the masses. That means that there are risks as well as opportunities. The market can be truly irrational, with all sorts of inexperience traders operating in strange ways. The key to be able to recognise that behavior, avoid doing it yourself and figure out ways to capitalise on it.
Stocks are shares of a particular company. That means, when you buy a stock, you are buying a small slice of a company. You are part of the ownership group, so to speak. The amount of shares you own gives you a relative voice in company affairs. But the main purpose of an investor or trader buying a particular stock is to profit of the rise of the price of the stock. Activist investors can buy lots and lots of shares of a company and try to affect how the company is run, but that is not what trading is all about.
Trading stocks means buying a certain number of shares at a low price and then selling them at a higher price, for a profit. At least, that is the ideal situation for a trader.
Indices means the plural of index. A stock index is, quite simply, a group of stocks. That group can come from many different geographic regions or it can be isolated to a particular country. It can also come from a sector of industry, such as oil and gas or retail stocks. The value of an index rises or falls based on the performance of the individual stocks.
When you trade on indices, you can speculate whether or not the index will rise or fall and not need to actually own any of the underlying assets.
Commodities like oil, gas, beef, cocoa, copper, gold and the like are traded in financial markets through the use of spread betting and CFD trading. There are cash and forward commodities and the main difference between them is the nearness of the settlement or delivery date. You are pretty much trading contracts to deliver commodities. If the settlement date is close, that means it is a cash commodity. If it is farther in the future, that means that it is a forward commodity.
They can be split into categories. Energy commodities like oil and gas are separate from hard commodities like gold and silver. Then there are soft commodities that are generally foodstuff or items that can go bad or expire.
And beyond actually trading and owning the underlying assets, as an online trader, you can make guesses on the prices of a particular financial asset and then place bets on them. For instance, if you think the price of gold will be a certain price at the end of the day, you can take out a binary option. Which means that you think the price of gold will be $1400 at 4 pm. If you are right, you get paid out on that option. If you are wrong, you lose that money. It is a simple way to get started in the world of online trading.
For more information on what you can trade online and how it all works, look to this resource for picking the right platform that will match your risk appetite and strategy.
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