trade: Importance, Types, Benefits, Risks, Differences from Investment

 

Trading is the activity that takes place in the financial markets. This activity is more than just the usual buying and selling of goods and services.

The purpose of this economic activity is to buy and sell in the short term for maximum profit.

how? Is it dangerous? 

What is a transaction?

Trade in general is a fundamental economic concept involving the buying and selling of goods and services.

Profits from trading activity are derived from the consideration paid by the buyer to the seller or from the exchange of goods or services between two parties.

International trade is the ability to trade not only with people from the same country, but also with people from all over the world.

International trading markets are becoming more competitive.

This also influences the creation of more competitive prices. In financial terms, trading refers to the process of buying and selling securities such as stocks.

In addition, trading is often done on the futures market and the foreign exchange market, the so-called FX (Foreign Exchange Market).

The profits are so attractive that many people try to trade for extra income.

Transaction type

There are different types of transactions commonly practiced by activists in the financial world.

1. Forex trading

Forex trading is trading at foreign exchange rates.

As you know, the value of foreign currency always fluctuates over time.

To do this type of forex trading, you can either exchange money directly at a money changer or you can exchange money online by first depositing some money.

Profits from foreign exchange trading depend on the exchange rate of the foreign currency and the desired currency. For example, if you buy $10 today, you have to pay IDR 14,000.

If exchanged in the future, the value of $10 could be IDR 15,000 when converted to Rupiah currency.

So we know the profit is IDR 10,000.

This type of forex trading is considered a big profit generating trade. However, the risks are quite high.

2. Stock trading

Be careful not to confuse stock trading with stock investing.

Both contain the word "stock", but the concepts are different. Investopedia even mentions that the two are completely different.

Stock trading is the buying and selling of stocks within a specific, usually very short period of time. Equity investment can be summarized as a "saving activity" to obtain long-term profits by purchasing stocks.

To trade stocks, simply sell or buy stocks when the price fluctuates.

Realizing capital gains and profit margins requires making the right decisions, especially when stock prices are skyrocketing.

3. Binary trading

As with any trading activity, binary trading activity cannot be separated from buying and selling. However, although this trade can also bring great profits, it is considered very risky.

Binary trading is almost always a scam.

Generally, this type of transaction is seen in gambling transactions such as horse racing or soccer matches.

To complete this trade, you need to set a goal and risk a certain amount of money.

If you can reach your goal, you can make a big profit. However, if you miss it, you will incur a loss.

4. Gold trading

Trading gold is not the same as buying, selling, investing or saving gold.

The mechanics of investing in gold are not very different from those of foreign exchange or stock trading. It's just money.

Gold trading can be done through a broker. If you opt for this type of trading, it is important to monitor the USD price. This is because gold price fluctuations are greatly influenced by the value of the dollar and the economic situation in the United States.

5. Bitcoin trading

Bitcoin trading is one of the newest trading instruments since it came out not too long ago.

Bitcoin is, of course, the subject of this type of transaction. Bitcoin purchases can be made in Rupiah currency.

please do not worry. You don't necessarily need a large amount of capital to be able to trade Bitcoin.

To make the right decisions, it is important to closely monitor Bitcoin price rises and falls.

Trading profit

Trading is often considered profitable for a variety of reasons, including:

1. Flexibility

Trading is recommended because it doesn't matter where you are at any time. As long as you have internet access, this is possible.

Plus, trading isn't a time-consuming activity, so you can do it in between your busy schedules without sacrificing your top priorities.

2. Convenience

Thanks to today's technology, you can access trading brokers online. In addition, there is also an automated trading feature that simplifies the trading process.

With this feature, it is no longer a problem to monitor price fluctuations and decide when to buy or sell trades.

3. Affordable rates and secure data

Even if the promised profit is large, it doesn't mean you need a lot of money to start trading.

Some online brokerages have no account opening fees and low commissions and spreads. Moreover, by choosing a reliable online broker, you don't have to worry about the security of the personal data you have to provide when starting trading.

4. Demo account for beginners

If you still have anxiety or confusion while trading, you can try the demo account first which also provides information and guidance on your trading strategy.

Trading risk

Of course, in addition to profit, there are some other things that traders should consider.

1. Large deposits

In fact, you can use the services of multiple brokers without high fees and start trading with a small amount. However, some trading brokers require a large security deposit from us.

This brings great benefits, but it also brings losses that should not be underestimated.

There are no institutions or institutions that guarantee deposits, so you must be prepared to take risks when trading.

2. Mistakes in choosing a broker

When looking for an online broker, you may end up choosing the wrong broker. There are hundreds to thousands of brokers online.

They offer various advantages.

Traders, especially beginners, should exercise extreme caution and conduct adequate research before deciding to trade with a broker to avoid losing money.

Difference between trade and investment

Trading and investing are often equated. In fact it's not true.

There are some that make the difference between trading and investing such as Motilal Oswal, Groww and Nirmal Bang.

1. Principle

Trading is based on the buy-sell principle. Therefore, traders buy assets in order to be able to sell them again in the future.

Currently, there is a buy-and-hold principle in investing. This involves an investor buying an asset and saving it until the investment objective is met.

2. Analysis

The focus of trading analysis is on technical matters such as charts, charts and their movements. Investment analysis, on the other hand, focuses on fundamental issues such as cash flow, development prospects, and financial statements.

3. Risk

The risks involved in trading are enormous. This is because the movement of buying and selling assets is very fast.

On the other hand, since the acquired assets are carefully selected by investors in advance, the investment risk is very low. 

4. Time frame

When trading, the dwell time of an asset by a trader is very short. It can take seconds to months.

In capital investments, on the other hand, assets are held by investors for the long term. It may take years or decades. 

5. Capital increase

The focus of increasing capital in trading is to generate short-term profits. If you do the right analysis and strategy, your capital will also increase.

Current investments are focused on creating long-term wealth with minimal risk.

Investors want to receive dividends as passive income. 

6. Efforts

When trading, traders often need to do some analysis on everything they do.

In fact, buying and selling assets should be analyzed first.

Investors are now more likely to perform analysis when initiating an investment or choosing a product.

In addition, investors make decisions based on the company's development prospects. 

7. Benchmark success

A measure of trading success is the profit earned from buying and selling assets.

The criterion for investment success is now the achievement of an investor's investment objectives.