Trading Stocks

What is Stock Trading?

Trading stocks is when you buy and sell stocks in a short period of time. Companies hire traders to get the best possible stocks and carry out their investment decisions. The main tactic traders use is looking at the swings in a stocks value. They buy the stock when the value is low and sell it when it’s high.

There is both swing trading and day trading. Swing trading is when a stock will be bought and sold within weeks, months, or potentially years. Day trading is when a stock is bought and sold on the same day.

Trading vs. Investing

It’s very easy to confuse the two because they both involve stocks being bought and sold. The main difference is that investors will buy stocks and keep track of them for very long periods of time. This can be from a year to 30 years of their stock. Investors' actions are very calculated and have a good sense of the company and better knowledge on the stock they have.

Traders will have stocks for an incredible short amount of time. When determining a stock to buy, they look at short term data. They have a less general understanding of the company they’re buying the stock from. Traders focus more on the price of the stock rather than its actual value (intrinsic value).

Stock Options

Stock options are contracts saying you will buy 100 units of a stock. The agreed upon price for the stock (strike price) is made when you buy the stock. You can choose to buy or sell the stock at any point until the contract runs out.

The option to buy the stock is called “call” and the option to sell it is called “put.” You have to pay a premium to the stock writer before you can get the stock option. The premium will cost more the more likely it is to make profit. People usually buy call option if they think the stock will rise in the future and put options when you think they’re going to fall

Commodities

Commodities are the raw materials harvested and refined into things we use everyday. Examples of commodities include wheat, crude oil, jewelry, metals, and even a coffee cup. Commodities are assets that are good for your portfolio because It can help diversify your portfolio and protect it against inflation. Commodity prices rise and fall depending on supply and demand. The demand is influenced by the U.S. dollar and supply shocks.The US dollar influences it because commodities are traded in dollars. If the dollar is more valuable, then it can slow the demand for commodities and vice versa. Supply shocks happen when there isn’t enough supplies to meet demand. A supercycle is a time period where the market for commodities is doing very well. This time period can last for 20 years and even outperform stocks at times.