Trading

Reviewed by Bhavana | Updated on Aug 27, 2020

What is Trading?

Trading involves vigorous participation in the financial markets in comparison to investing, which works on a buy-and-hold strategy. The success of trading is dependant on the ability of a trader to be profitable over a period of time.

A trader is a person who gets involved in buying and selling of a financial asset in any financial market. He or she can buy or sell either for himself/herself or on behalf of another individual or institution. The main difference between an investor and a trader is the duration for which he or she holds on to the asset.

A trader is a person who engages in the short-term purchasing and selling of an equity either for an institution or for themselves. The disadvantages of trading include - capital gains taxes which is applicable to trades and the expenses of paying brokers in the form of multiple commission rates.

Conclusion

Trade is a primary economic concept which involves buying and selling of commodities and services, along with a compensation paid by a buyer to a seller. In another case, trading can be an exchange of commodities/services between parties. Trade can occur between producers and consumers within an economy.

What are the advantages of Trading?

Traders can work for financial institutions, in which case they will trade via the funds and credits of a company, and they are paid a combination of bonus and salary. As another option, traders can work for themselves too, as in they can trade with their own money and credit. However, with this option they will also keep all of the profit to themselves.

Highlights of trading:

  1. Trade involves exchange of commodities and services, mostly in return for money.
  2. Trade can happen within a country, or amongst trading nations. In case of international trade, the theory concerning comparative advantage speculates that trade proves to be a benefit to all parties, even though critics contend that it leads to stratification within countries in reality.
  3. Economists recommend free trade amongst nations, but protectionism like tariffs might present themselves because of political motives.

When it comes to foreign trading, the following are the latest trends: 1. Forced dynamism 2. Cooperation among coutries 3. Growth in emerging markets 4. Technology sharing 5. Liberalisation of cross-border movements