The financial market has been experiencing a steady increase in participants for several years. The main target group are small private traders who want to earn a little money in addition to their full-time job.
Some people don’t even care about the money at all and only trade via a demo account with virtual money. For the majority of customers of online brokers the general interest has led to the registration. They do not hunt the big money and trade with an average of three to ten euros per option. Nevertheless, trading on the financial market is becoming more and more popular, more and more people are actively taking part in online trading and the total amount traded is therefore also increasing. There are, of course, a large number of products that are traded on the financial market. There are different approaches, options and strategies for these. The current three most exciting areas are the Forex market, crypto currencies and of course the stock. In the following article, the basic facts are presented in detail and the strategies for trading are briefly explained.
What does the term “financial market” mean?
The financial market is the trading place for buyers and sellers from all over the world. Currently the trade takes place on the Internet and there are now many areas which are fully automated. Large companies that specialize in trading or highly professional traders use algorithms that buy and sell profitably in fractions of a second. However, this area of financial trading cannot be reached by the average trader and is also not desirable. It’s not for nothing that the industry is a leader in burnout. Back to the definition of what the financial market is. The financial market is a generic term for several markets. There is the money market, the capital market and the credit market. The capital market comprises the primary and secondary equity market, the credit market/foreign exchange market is the trading centre for the currencies. The various products traded are therefore not traded on a “marketplace”, but are traded in a differentiated manner as in a well-assorted supermarket.
Probably the best-known financial product – Shares
The first share was already tendered in 1200. It was thus one of the first financial products to be traded and used to finance further trading. An issuer, the issuer of the security, creates new liquid funds by distributing company shares. Market participants who want to invest their money buy a share and expect it to increase in value. The money generated by the purchase gives the company the opportunity to make new investments in the market itself. The new investments and financial resources will enable the company to operate more successfully in the market, which will ultimately also benefit the shareholder.
Trading one share
By buying a share, the holder receives a right to a profit. This is generated by interest, dividends and realised profits of the company on the market. If the value of a share rises, the shareholder is in a position to resell it profitably to others. In order for stock trading to be risk-free and for a strategy to prove itself, it is necessary to keep a close eye on several things and check them before buying. This includes the value of the company, the potential of the company, the market including customer potential and competitors as well as the technological, social, economic, political, geographical influences on the company, competitors and the market itself. Trading shares is very complex and it can take many months before the time comes when the sale is worthwhile.
The Forex market is the trading of currencies and exchange rates. You know the principle when you go on holiday outside Europe. Then the euro is exchanged for another currency at a certain rate. This price is the basis for trading. The binary options are mainly used, i.e. the rising and falling prices are used. The trade itself goes in a matter of seconds and is easy to explain. The EUR/USD is used as an example. This currently stands at 1.16 points. This means that you can get 116 US dollars on the exchange exchange for 100 Euro. But as a trader, you don’t trade or buy currency. You bet on the course itself. Either one assumes a rising price, a call option or a falling price, a so-called put option. If the option set is right and it runs in the money, there is a return on it. On average, this is 90 percent for a call option and about 80 percent for a put option. Accordingly, for a successful call option, a stake of 100 euros generates a profit of 90 euros. Particularly attractive are the time frames, which are freely selectable between a few seconds and several months. According to this, several profits can be generated within a few minutes. In order for this trading to be successful and risk minimized, you need a reliable broker, Internet access without delay, patience, discipline, knowledge of currencies and their influencing factors as well as perfect knowledge of analysis tools, how to use them and what the result means.
Trade in crypto currencies
Crypto currencies have been around since 2009 and since then they have caused turmoil on the market and big surprises – sometimes positive and sometimes negative. The digital currency exists only on the screen, cannot be reprinted, arises from mining, makes payments more secure and faster. Payments are completed in the same seconds as they were made. Another special feature of crypto currencies comes to light in the financial market. You can invest in these as it works with a stock and you can trade on the price developments as it happens with the usual currencies on the Forex market. Of course, the crypto currencies are also influenced by different factors. For example, negative attitudes towards crypto currencies in China have caused the Bitcoin price to fall. Trading strategies are primarily determined by risk analysis and the various market influences.
In order for financial market activities to be successful, no matter what financial product they are, it is essential to know the market and all its influences. Policy decisions, social and societal developments, new technologies and other economic sectors and participants have a direct impact on financial markets. A comprehensive analysis of all influencing factors is necessary to minimize the risk and increase the chances of profits. Further topics on risk assessment, opportunity analysis and explanations on trading tools can be found on Asktraders. On the site you can find all licensed online brokers, which enable secure and regulated trading.