It could be really confusing to figure out where to start when you first start trading in the financial market. Learn the facts here now. Many new investors can get overwhelmed when they first see their brokerage account. The biggest mistake that traders do here is to try to run before they learn how to walk.
You need to understand the basics of trading and the financial instruments that you can trade. The other important thing to start trading is to know the different positions, the trading platform that you can use and also how much capital you can invest.
What is investing?
The two terms investing and trading are used interchangeably in the financial markets especially by those who are new in the market. This could be confusing.
An investor builds his portfolio by buying and holding on to the stocks or other financial instruments for a long term. The investors will hold on to their position for months or even years. The investors take advantage of dividend and coupon payments. The investor will not sell his holdings even when the market falls in the hope that the market will eventually rebind. The investors are thus concerned with what happens in the long-term and short-term movements do not change their trading decisions.
The investors have physical ownership of the instrument that they have brought. If an investor has shares then he owns a portion of this company. This gives him some rights in the corporate action of the company.
What is trading?
Trading involves buying and selling the stocks and other financial instruments frequently. The traders only speculate and they do not have any ownership of the asset.
They trade long as well as short the market. The trader sells the instrument without owning it. This is called as a short sell. An annual return of around 15% is what most traders aim for but the ability to short sell lets the trader make better returns.
A trader can have an open position for seconds to minutes. This is based on what his objectives and his trading style are. It is also dependent on his risk-taking appetite and how much time he can trade in a day. The trader needs to be more updated on what is happening in the market and they need to assess the market regularly. There are many financial instruments that can be traded.