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At one time, when you heard the terms investing or trading, you would think of expert stockbrokers on the trading floors of Wall Street, but in recent years the possibility to trade has become more accessible than ever for the “average Joe.” But setting out in the world of trading can seem overwhelming. Here we discuss the fundamentals of trading.

Trading or Investing

The most well-known and arguably the most successful investor of all time, Warren Buffet, defined investing as “the process of laying out money now in the expectation of receiving more money in the future.” Who doesn’t want that? So first, there is a fundamental difference between trading and investing. Whereas investing usually has a longer-term goal, with trading you are looking to make a profit in the short term by buying and selling stock frequently.

Day Trading 

Day trading has become incredibly popular, and there are many options for novice traders. The clue is in the name. Day trading usually means purchasing and selling in one trading day. A trading day refers to the period that a stock exchange is open, depending on the time zone. For example, the New York Stock Exchange is open from 9:30 AM Eastern Time to 4:00 PM Eastern Time, Monday – Friday. Forex or foreign exchange is a common form of day trading. Forex trading is the most popular way to trade CFDs (contract for difference). With an online stockbroker, you can get started with CFD trading as a beginner. This type of trading is one of the most significant differences between investing and trading. You don’t need to own the asset, as you are profiting from assets’ differences or price movement.

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Stock Market

Trading on the stock market simply means buying/selling shares of a company. Because there are thousands of companies listed, it can be very daunting. Be sure to take a close look at the company you are considering investing in. In particular, research sales, profit, and loss and whether their stock price is equivalent to the company’s value. If there is a big discrepancy, this could be a red flag. Some of the most popular companies to invest in are Amazon, Tesla, and Apple. If you want to get started with trading on the stock market, index trading is a good place to start, as it allows you to buy and sell entire indexes, which are groups of companies, for example, the ever-popular FTSE 100. The 100 largest companies listed on the stock exchange make up the FTSE. 

This is just a fundamental look at the trading, and there are numerous increasingly popular options like swing trading and cryptocurrency trading with Bitcoin, etc. Whatever your trading interest, remember that there is a lot of work to understand what makes a good investment, and mistakes can be costly. A great option now available to beginner traders is social trading. As a beginner, you can follow an expert trader with social trading platforms and copy their strategies.