Terms for People Who Want to Start Trading
the past couple of decades, the trading world has
undergone changes that have completely shifted the
way the industry functions. These changes have led
to the popularization of the markets among many people.
Once upon a time, it was unthinkable that the average
Joe or Jane could compete with the big boys on the
various trading markets, especially the stock market.
The world of trading was a clubhouse, reserved solely
for those who had the connections to participate.
In other words, brokers, financers, CEOs, business
insiders, etc. However, this has all changed thanks
to the introduction of online trading platforms.
is Online Trading?
trading is exactly what it sounds like. In 2022, anyone
can use the internet to access some of the best
trading platforms in Australia, and trade assets
on any market that is available on the website. The
world has undergone some serious developments thanks
to the internet. In that sense, the trading scene
is no different. Not only have online trading sites
made it so anyone can access the market, but they
have also made trading a lot simpler. This is thanks
to the fact that these websites are very newbie-friendly.
Not only do most of them implement a very easy-to-understand
and navigate interface, they also offer some tutorials
that will help newcomers get a hang of the market.
top of all of this, these websites put special emphasis
on security and safety, making them perfectly safe
to use. They also cover a wide range of markets, which
means any trader can choose where they want to start
their journey into trading.
that we've covered what online trading is, let us
look deeper into some must-know terms that any trader
should be aware of.
trader worth their salt could go into the trading
world without knowing or understanding what market
capitalization means. Often shortened to market cap
(or simply cap colloquially), the term refers to the
total value of all the outstanding common shares of
a certain publically traded company that are owned
by the stockholders.
formula for calculating market capitalization is quite
a simple one. All you really need to do is multiply
the share price by the number of common shares. Market
capitalization is often used to rank the size of companies
and stock exchanges. According to market cap, the
biggest stock exchange in the world today is the New
York Stock Exchange (colloquially referred to as Wall
Street due to the name of the street where the stock
exchange is headquartered). Other big stock exchanges
in the world include NASDAQ, Euronext, Shanghai Stock
Exchange, Tokyo Stock Exchange, London Stock Exchange
and the Hong Kong Stock Exchange, among others.
people will likely be familiar with the stock exchange
market. However, what might surprise you is to learn
that the stock exchange is not the most popular or
widely used trading market. That honor goes to forex.
So, just what is forex?
is a portmanteau of the words "foreign"
and "exchange", and the forex market refers
to trading, buying and selling different FIAT currencies
from different countries. The way the market works
is, currencies from around the world are placed in
pairs and then traded on the market.
Popular currencies that are traded on the Forex market
include the U.S. Dollar, the Canadian Dollar, the
Australian Dollar, the European Euro, the British
Pound Sterling, the Japanese Yen and the Chinese Yuan.
Though these are the most popular, in theory, you
could trade any currency you want. It is worth noting
that Forex does not encapsulate cryptocurrency,
as that is a completely different trading market.
some might know, most traders will measure the volatility
of the markets before they get into trading. For those
who are unaware, volatility refers to how frequently
the market's prices fluctuate. Different markets have
different volatility rates and it is important to
take note of how quickly the stocks change their value.
way to measure a stock's rate of volatility is called
beta. When it comes to most markets, the beta is set
to 1. However, sometimes, a stock might be more volatile.
In order to mark this, a trader might place that stock's
volatility as 1.5. This means that, when the market
moves by 1 point, the stock marked with 1.5 moves
by 1.5, meaning that the stock is a lot more volatile
than the other one.
very common trading strategy, day trading refers to
purchasing and then selling stocks in a 24-hour period,
or one trading day. Day trading is a very popular
strategy, especially among serious and seasoned traders.
However, it is worth noting that it is not recommended
to newbies, as day trading requires a lot of experience
in the market that is being participated in. However,
once you've garnered the experience necessary, many
traders would argue that day trading could be a lot
more rewarding than any other strategy.