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Trading: Meaning, Types, Profits, Risks, And The Difference With Investing | FINANCE

Profit

Trading is an activity carried out in financial markets. This activity is not just the process of buying and selling ordinary goods or services.

The purpose of this economic activity is to buy and sell in a short time to get the maximum profit.

How to? Is it risky?

Come on, learn everything you need to know about trading in this article that Toktok3 has compiled!

What is Trading?

Reporting from Investopedia, trading in general is a basic economic concept that includes buying and selling of goods and services. Profits from trading activities are obtained from compensation paid by a buyer to a seller, or the exchange of goods or services between two parties.

Trading can not only be done with people from the same country, but also globally which is called international trade The international trade market offers fiercer competition. This also has an impact on creating more competitive prices.

In the financial concept, trading refers to the process of buying and selling securities, for example stocks. In addition, trading is also often carried out in the futures market and foreign exchange market or what is often called forex (foreign exchange).

Many people try trading as an additional income because the profits are quite tempting.

Types of Trading

Investing

There are several types of trading that are popularly practiced by activists in the financial world, namely:

1. Trading forex

Forex trading is trading foreign currency exchange rates. As we know, the value of foreign currencies always fluctuates over time. To do forex trading, you can exchange money at money changers directly or online by depositing some money first.

The profit you get from forex trading depends on the exchange rate of foreign currency with the currency you want. For example, if we buy 10 US dollars today, we have to pay IDR 14,000.

When we exchange it in the future, it could be that the value of 10 dollars when exchanging it back to the rupiah currency becomes IDR 15,000. So, it can be seen that the profit is IDR 10,000. Trading this type of forex is considered one that generates large profits. However, the risk is quite heavy.

2. Stock trading

Be careful not to get confused between stock trading and stock investing. Both do contain the word stock, but the concept is different. Investopedia even mentions that the two are very different things.

Stock trading is the activity of buying and selling shares within a certain period of time, usually quite short. Meanwhile, stock investment can be summed up as a "saving" activity to gain profits from purchasing shares for the long term.

To trade stocks, all you have to do is sell or buy them when price fluctuations occur. Your decision must be right to get capital gains or profit margins, especially when stock prices are soaring.

3. Binary trading

Just like other trading, binary trading activities cannot be separated from buying and selling. However, this trade is considered very risky even though it can also generate large profits.

Most of the time, binary trading is a scam. Usually, this type of trading is found in gambling transactions on horse races or soccer matches. To make this trade, we have to set a target and risk a certain amount of money.

If the target is reached, there will be big profits to be gained. However, if you miss, you will suffer a loss.

4. Gold trading

Trading gold cannot be equated with buying and selling, investing, or saving gold. The way gold investment works is not much different from forex and stock trading, it's just that the object being traded is gold.

Gold trading can be done through a broker.

It is important to monitor the price of the US dollar when choosing this type of trading. This is because fluctuations in the price of gold are strongly influenced by the value of the dollar and the economic conditions of the United States.

5. Trading bitcoins

Since its emergence some time ago, bitcoin trading is one of the newest trading alternatives. The object in this type of trading is of course bitcoin. Bitcoin purchases can be made in rupiah currency.

Don't worry, to be able to trade bitcoin, we don't always need large capital. The important thing is to carefully monitor the rise and fall of bitcoin prices in order to make the right decision.

Trading Profits

Trading
Trading is often considered profitable for several reasons, including:

1. Flexible

Trading is preferred because it doesn't matter when and where you are, this can be done as long as there is access to the internet.

In addition, trading is not a time-consuming activity, so it can be done on the sidelines of busyness without disturbing top priorities.

2. Practical

Thanks to today's technology, you can access trading brokers online. Not only that, there is also an auto trading feature to make the trading process easier. Monitoring price fluctuations and determining trading buying and selling prices is no longer difficult with this feature.

3. Affordable fees and secure data

Even though the promised profit is large, it does not mean that large capital is needed to start trading. Some online brokers charge no account creation fees and charge inexpensive commissions and spreads.

In addition, by choosing a trusted online broker, you don't need to worry about the security of personal data that must be included to start trading.

4. Demo account for beginners

If you are still unsure and confused about trading, you can start by trying a demo account which also provides information and guidance on trading strategies.

Risk Trading

Trading

Besides profit, of course there are some things a trader should be aware of:

1. Large deposits

The services of several trading brokers can indeed be accessed without large fees, and trading can be started from a small amount.

However, there are also trading brokers that require us to deposit large amounts. This brings great advantages, but also losses that cannot be underestimated. If you intend to trade, you must be willing to take risks because there are no institutions or institutions that guarantee deposits.

2. Error choosing a broker

When looking for an online broker, we might choose the wrong one. There are many brokers to choose from online, their number reaches hundreds to thousands. They offer different advantages.

Traders, especially beginners, must be really careful and do sufficient research before choosing to trade with a broker so they don't lose.

Differences in Trading and Investment

Investing

Trading and investing are often thought of as one and the same thing. In fact, that's not true.

There are several things that underlie the difference between trading and investing, including Motilal Oswal, Groww, and Nirmal Bang.

1. Principles

In trading, the principle held is to buy and sell. Thus, a trader will buy assets to be able to sell them again in the future.

Meanwhile, investment has a buy and hold principle. Where an investor will buy assets and save until their investment objectives are met.

2. Analysis

The focus of the analysis of trading is technical matters such as charts, charts and the movements in them.

Meanwhile, the investment analysis focuses more on fundamental matters such as cash flow, development prospects, financial reports, and others.

3. Risk

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

Meanwhile, the investment risk is very low because the assets purchased are strictly selected by investors beforehand.

4. Timeframe

In trading, the length of time an asset is held by a trader is very small. It can be in seconds to several months.

Whereas in investment, an asset will be held by the investor in the long term. It could be in a few years to decades.

5. Capital growth

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

Meanwhile, investment focuses on adding wealth in the long term by minimizing risk.

An investor aims to get dividends as passive income.

6. Efforts made

In trading, a trader must often do analysis for every thing he does.

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

Meanwhile, investors will more often do analysis at the start of an investment or when choosing an instrument.

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

7. Benchmark success

The measure of success in trading is the profit generated from buying and selling assets.

Meanwhile, the benchmark for success in investing is the achievement of an investor's investment goals.

Trading is an activity that can be done to make a profit during spare time.

However, it can be concluded from Toktok3' explanation in this article that extra caution is needed so as not to experience unwanted things when trading.

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