Activities in the capital market do not only revolve around investment. You can also trade if you want to achieve short term financial goals. Beginner traders can try different types of trading in the capital market to increase their assets.
The instruments used for trading are certainly different from investments. Although there are investment instruments that can be used as trading tools, the analysis process is not the same as investing in the long term. Read this article in full so that you better understand the types of trading instruments and their working mechanisms.
What is Trading?
Trading activity is actually not the same as investing. Trading is a transaction of buying and selling assets in the capital market for profit. This activity is carried out in a short time. This means that assets that have been purchased must be sold according to changes in the price of the asset per hour or even per minute.
As with other buying and selling transactions, the profit from trading also comes from a selling price that is higher than the purchase price. A trader must be able to maximize his profit potential. The trick is that they must be diligent in mastering trading knowledge and be observant in analyzing asset price movements in the capital market.
The main difference between trading and investing lies in the timeframe. Investing means that you buy an asset, then hold it for a certain period of time, usually up to a year, before reselling it.
Meanwhile, trading only involves buying an asset and instantly selling it within a few hours. Why was the asset immediately sold? The reason is, asset prices continue to move every minute or hour according to capital market conditions. Traders must find the right momentum to resell their assets so as not to suffer losses.
3 Types of Trading You Can Try
Have you ever caught a glimpse of trading activity? If so, now you can find out the types of trading in the capital market.
In general, there are four types of instruments used for trading, namely stocks, forex, gold, and cryptocurrencies. Learn more about the instrument below.
1. What is Stock Trading?
This type of trading uses stocks as an instrument, just like you would invest. The difference is, you buy a stock when the price is low, then sell it when its value soars. So you don't keep stock for a long time.
Stock trading requires proper analysis and calculation in order for you to succeed in obtaining capital gains or profit margins. If it is not done properly then the trader will experience a loss which is called a capital loss.
One of the popular analyzes in stock trading is technical analysis. This analysis is based on historical changes in stock prices and volumes in the stock market so you can know when to sell or buy stocks.
You need several indicators to analyze it, such as Moving Average (MA) or Price per Earning (P/E) Ratio. Don't worry, novice traders can master this formula because the calculation method is quite easy.
2. What is Forex Trading?
Forex trading involves buying and selling currencies of two different countries through the world foreign exchange (forex) market. Because it is done globally, forex trading is done 24 hours for five working days.
The term forex itself is an abbreviation of foreign exchange, meaning the exchange of foreign currencies. So, you need to exchange some money to the destination currency before making a transaction.
The profit from forex trading comes from the selling price of forex which is higher than the buying value. Fluctuating forex value alias always changes all the time, so the risk is quite large. So, you have to determine the right moment so that this trade can make a profit.
3. What is Gold Trading?
Gold is one of the most desirable commodities as an investment instrument. The mechanics of trading gold are similar to trading stocks or forex. You have to buy gold at the lowest price, then sell it at the right time.
When you trade gold, you should monitor the price movement of gold in United States Dollars, not domestic. The reason is, fluctuations in gold prices are influenced by the country's economic conditions and the value of its currency.
You can trade gold online through the services of a broker. This convenience, of course, makes you not have to bother going back and forth just to sell or get the gold.
Which Type of Trading is Right for You?
All types of trading above are very suitable for beginner traders to do. You only need to increase your knowledge about trading and do the right analysis so that your trading activities pay off. Also, learn how to read asset price charts to practice your foresight on price movements.
Trading is risky, in fact you often experience losses in the beginning. Therefore, you need to prepare special cold money for trading. Your financial condition will not be disturbed if you have good financial management before trading.
Improve Your Trading Knowledge!
You can more easily master the types of trading and the steps of analysis thanks to the development of information technology today. There are so many platforms for sources of information and education about trading, one of which is the HSB blog. You will learn a lot about trading, from knowing what trading is and its various techniques.