Must-know Terms for People Who Want to Start Trading

In 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.

What is Online Trading?

Online 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.

On 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.

Now that we've covered what online trading is, let us look deeper into some must-know terms that any trader should be aware of.

Market Capitalization

No 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.

The 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.
Forex

Most 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?

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.

Beta

As 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.

The 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.

Day Trading

A 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.