Investing and trading
Investing is putting your capital in an enterprise with the goal to earn profit from it. A person can invest in property, insurance, stocks, or at Forex market, that is commodities.
When investing in property, you can invest long term, or short term. Long term presumes buying a housing land, or an area that is attractive for building. With time the demand for the land expands, which boosts the price of the property. That period can last for a decade or two, which is a long time, thus “long term investing”.
Short term presumes, buying an apartment and then renting it, thus receiving payments shortly after purchasing the property.
Investing in bank savings means that you would give money on a bank account and in return you get interest. Insurance is also a means of investing, where you can return your money through some interest, depending on the term that could range from one month to several years.
Investing in bonds means lending money to Government bonds for a longer period of time, and after that time, the money gained from the interest is yours. Basically, buying a bond means buying a document that the money operated that we lend will make profit of which we will have a cut.
Investing in stocks means buying shares of a certain company. When we have stocks of a company, we are basically partners with the owner, as we do own actual parts of a company. The value of stocks increases or decreases based on the success of the company. If we see that the value is higher since we bought it, we can sell it for better price, or we don’t have to sell it, we get a proportional part of the company’s profit, if there is a profit at the end of a year.
Trading in the Forex market is trading at the world’s largest market. Since ancient times people have been trading their goods, but after the invention of money, the goods are no longer means of payment. The Forex stands for foreign exchange, and it is foreign exchange market. Biggest traders in the Forex are huge Banks, or central banks. Dealers and brokers are people who do investing on behalf of the trader. Brokers trade money in a way that they buy a currency for a certain price and sell it for another currency when the price of the first one reaches certain value. For example, a person buys one euro for 1,18 dollars. After a certain time, the value of Euro rises due to certain happenings in global European economy, and it is now worth 1.2 dollars. So you then sell your euro to somebody for 1.2 dollars and you get your profit. You can also buy and sell commodities (gold, silver, oil) the same way, but you can’t sell gold for other currencies except for USD.
In order to be a successful trader, people are trying to find a Holy Grail formula, but beside patience, there is nothing special to add. But there are some directions to the path to your own strategy. Having the ability to exactly know at which direction the market would go is impossible, but having the ability to predict based on the speculation can be acquired with hard work.
As in any science, knowing the history of a moving line might give a clue about where the line could go next, and for more accurate presumption, the longer time frame of the previous movement you have to look at. Many traders prefer trading on short term using the leverage, but the risk is thus higher, because if the trade turns against you, you lose heavily. So, only when the short term traders are highly convinced that the trade should go to desire direction, they invest this risky way.
So whether you are a trader or an investor, it all goes back to the foundation of being well prepared and informed about the thing you are dealing with. You have to be prepared for losses, because it’s all about change in value, so if you win something it means somebody else had to pay for it. It can happen that you are the one who pays sometimes. But overall value of things grows over time if being preserved well, so patience is really something that will bring lots of good news in this job.
Investing and trading