Everyone is always looking for a way to make more money by adding an extra source of income. One of the best ways to make good returns on investment is to invest your money in the trading industry. Expert traders can make millions of dollars trading part-time. Most people think trading is too complex to try out, but the rest is a breeze once you grasp the basic concept. In this article, we will look at the different terms that you might come across while learning about trading. On your journey to becoming an expert trader, you will notice that trading has many different terms for different processes and items. You can expect to keep seeing more words in the industry as it grows and expands.
What is Trading?
Trading is simply defined as buying or selling commodities or securities. There are several types of trading that you should familiarize yourself with;
- Bond trading – performed by traders who deal in bonds. Bonds are contracts between two companies or parties. The government also issues bonds regularly. These institutions use bonds to borrow from the public. The sum in question is usually substantial, so the bonds are usually in high supply.
- Options Trading – involves buying and selling contracts that are referred to as options. Options derive their name from the fact that the owner of an option can choose to exercise the contract or not.
- Proprietary Trading – Proprietary trading refers to trading performed with an organization, particularly a bank or a financial firm. It is also sometimes referred to as prop trading and may include trading bonds, commodities, currencies, or other instruments.
- Day Trading – Day Trading refers to the act of buying shares of a stock with the intention of selling them on the same day (within 24 hours).
- Swing Trading – Swing trading involves buying stocks and holding them for a minimum of one night. Professional traders can choose to keep the stocks for multiple nights, although swing trading is generally a shorter-term kind of investment. You can learn more about swing trading
Pattern Day Trader Rules
A day trader can follow Pattern Day Trader Rules. The rules stipulate that the trader take three or more day trades at any given five-day period. The trader is then required to maintain a 25,000-dollar minimum account balance. Newbies at trading find it almost impossible to trade with this minimum account balance, so they get the help of Prop firms.
The stock market opens bright and early in every country you go to. Most sticks to the 9:30 am timing for opening hours. All professional traders have to be licensed to participate in trading. Licensed traders should have their series 6, 7, 63, and 66 licenses approved. Ordinary day traders do not have to be licensed, which is a relief for anyone looking to dip their toes and feel the industry. You do not have to get committed before you are sure you want to trade for a living.
Bear in mind that trading is not for everyone; it requires dedication, discipline, and a lot of hard work. You will have good days and bad days. There are days when traders lose millions only to earn double the amount back in a few weeks. If you are willing to put in the time and work, you are guaranteed to make a good income.
Article by Born Realist