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The Many Financial Markets and How to Trade Them

By Learn To Trade · March 25 2020
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Resources

The Many Financial Markets and How to Trade Them

By Learn To Trade
March 25 2020
Reading:
egg
egg
egg
the many financial markets and how to trade them

The Many Financial Markets and How to Trade Them

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By Learn To Trade · March 25 2020
Reading:
egg
egg
egg
the many financial markets and how to trade them

Promoted by Learn To Trade

You have probably heard that there is more to trading than just stocks. Although that is the market that most people are familiar with, the truth of the matter is that investing in the stock market can be extremely risky, and comes with very limited opportunities for protection. The events of the past few weeks should be clear evidence of that for everybody.

So, what then can individuals who want to generate an additional income from the financial markets do?

Well, one thing they can do is to learn more about short- and medium-term trading, as opposed to just doing long-term investing like everybody else does. And when it comes to shorter term trading, it’s pretty clear that other markets provide far greater opportunities than the stock market.

In this week’s blog post, we therefore thought it would be a good idea to briefly go over some of the financial markets that exist, and how you can trade them. As you will see, some markets are far better suited than others for ordinary people who want to generate a side income from trading.

The stock market

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The stock market is probably the best-known market for most of us. This is where most people save their for their retirement by making small contributions every month. And this is actually true even though you don’t save actively on your own, as you most likely have a pension plan through your employer that invest your contributions in the stock market on your behalf.

As a result of this arrangement, almost all of us are invested in the stock market. And sometimes it can be rather difficult – if not outright impossible – to opt out of this arrangement. Therefore, it might actually be beneficial to consider another market when it comes to your own personal trading, as this would help with diversification and thus lower your overall risk.

The special thing about the stock market is that it has such a huge number of stocks to choose from. In fact, there are hundreds of thousands of publicly listed companies that can be traded around the world. And while that does provide some benefits, it is certainly a lot to keep track of. As would be expected, this can definitively complicate things for many non-professional traders and investors.

The bond market

The bond market is unique in the way that it is largely dominated by so-called institutional players, meaning banks, mutual funds, hedge funds, and large corporations. However, there is still some retail trading activity in this market, although it is dwarfed by the institutions. This, by itself, makes it difficult to compete on a level playing field.

Despite this shortcoming, the bond market has the benefit of being perceived as a lower risk market compared to the stock market. The moves are slower, and they tend to be inversely corelated to stocks. As a result, this market may offer some diversification benefits for people who are invested in the stock market, but be aware that returns are generally quite low.

The crypto market

A market that many people still don’t have much experience with is the cryptocurrency market. This is a new, but rapidly growing market that in many ways can be considered “the wild west” of finance. Completely unregulated, and traded on a large number of exchanges – usually based offshore – this market is beyond the control of any government regulator and central bank, and therefore offer a glimpse into how a completely free market operates.

The problem with the crypto market, however, is the erratic moves we often see there. Overnight moves of 10% is not uncommon for bitcoin – the largest cryptocurrency – and even bigger moves may be seen in some of the smaller cryptocurrencies. Because of this, most investors consider the crypto market to be too risky to invest more than a small amount of money in.

The forex market

Lastly, we have the foreign exchange (“forex”) market, which in our opinion is the most suitable place to be for ordinary people who want to learn to profit from trading. The forex market is perhaps what we can call semi-regulated, and is the place where banks, investment funds, large companies, and speculators all come together to trade the various national currencies against each other.

The great thing about the forex market for independent traders like us is that it offers high leverage, meaning that even just a small amount of capital can result in significant profits (and losses). This is essential for smaller traders who want to make a living off of their trading, as something like that would be more or less impossible in for example the stock market without a large amount of capital.

Another major benefit is that the forex market trades 24 hours a day on all weekdays, which makes it easy to participate no matter what your working schedule is, or where in the world you are working from. This thus opens up the opportunity for a level of personal freedom and flexibility that we know a lot of independent traders enjoy.

So, to the question of which financial market we believe is the most suitable for independent traders, the answer is easy. The forex market is simple enough to be learned by anyone, offers trading opportunities 24 hours a day, can offer high leverage, and is big enough for even the largest traders to find ample opportunities to profit.

Join our trading seminar

If this sounds interesting to you and you would like to learn more, feel free to check out our upcoming Lifestyle Trader seminars in Australia. Tickets for general admission are free, but seats are extremely limited, so we highly recommend you secure yours today!

 

The Many Financial Markets and How to Trade Them
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