what is trading and how does it work | Trading

 

Hello Friends!

we are discuss about trading.

In this Article we are going to answer the question

what is trading and how does it work:

Trading is relatively easy to understand fundamentally we are simply buying and selling things if we look at four random items a bicycle a scooter a truck and a car then we can see that they all have a value that is what they would cost if you wanted to buy them we can say the bike is 100 pound the scooter at 1000 pounds the truck 20,000 pounds and the car 75,000 pounds

Let's look at the bank in more detail from a traitorous perspective there is always a buyer and the seller of the good and both parties think that they are getting a good deal otherwise they wouldn't pay the price or accept the offer respectively as a trader.

We try and profit off of any buying and selling we do the simplest way to think of this is in terms of buying or going long as you would say in trading you simply buy at price X and hold on to your position you do this because you think the market in whatever you have bought is going to rise if that happens you can then sell at price Y and make a nice profit think back to our bike.

Example:

we buy the bike for 100 pounds we do this because we think that the price of a bike is going to rise after we buy the bike there are suddenly a lot of interested buyers there are more buyers than there are available bikes so the price rises to 110 pounds you make a nice tempo profit as you sell the bike there are lots of ways you can trade as a retail trader one of the most common is through a CFD account or contract for difference accounts let's look at our bike

Example:

where you bought the foot seat at 7,000 instead of rising it falls to six thousand nine hundred and ninety which is a 10 point drop and you decide to exit the trade in this example you lose ten points we are still wrong ten pound four points with spread betting or we had bought five mini contracts at two point four contracts and that would be CFDs in both instances you know lose 100 pounds as traders we can also profit from selling or going short as it is called in trading when we short the market we enter into an agreement with another party we say that we will sell to them at the current price sometime in the future they agree in their minds they are protecting themselves they believe that the market is going to increase in price and want to buy at the current price however you believe the market is going to fall if the market does fall you can buy at a lower price say five pound you already agreed to sell to the previous party for a ten pound so you fulfill the agreement and make a nice five pound profit I want to buy a bike how about we say 100 pounds that sounds like a fair deal now I know I can buy the bike for 100 pounds which is a fair price I can afford and since I think the price of bikes is going to increase I've done some good business here I'm pretty sure I'm going to be able to pick up a bike for less than 100 pounds now if the price of bikes does drop to seem 90 pounds you can still sell it for the agreed price of 100 pounds and make a 10 pound profit however if the price of baek's increases to say 110 pounds you have agreed to sell it for 100 that means you will make a 10 pound loss on the trade let's look at our footsie 100