Trading 101: Popular Markets You Should Consider
Investing among British adults rose significantly after the global pandemic. In 2020, Reuters reported that 69% of British adults who owned investment accounts added to their portfolios. The financial turbulence of the global health crisis lowered the prices of many assets, which allowed investors to take part in the market despite having limited capital. For many, investment was a way to hedge against financial insecurity. In addition, buying wealth-growing assets allowed them to gain additional income streams, which could help support them should their main income sources take unexpected hits.
But buying and holding aren’t the only things investors can do with their assets. Investors can also manage their assets more actively by trading. In simple terms, trading is the act of buying and selling securities for a profit. If this is something that interests you, one thing you should know is that there are different kinds of markets you can dip your toe in. Here are some of the most popular:
In the stock market, traders buy and sell shares of a company through the stock exchange, and the most popular in the UK is the London Stock Exchange. However, anyone can now start participating in the stock market through digital platforms where they can sign up for a brokerage or trading account. You can even place trades in other countries’ major exchanges, such as the NYSE and Nasdaq in the US if the company you want to buy shares in are only listed in their respective countries.
The stock market is something that almost every trader learns about. This trading market has outperformed most investment platforms, which makes it a great foundation for your investment portfolio. You can buy shares of industry giants like Apple and Amazon or invest in companies you think have potential growth, like tech startups. Given the market’s volatility, you can either make huge gains or suffer major losses.
The foreign exchange (forex) market is the largest and most accessible trading market. As explained by an FXCM guide to forex, one global currency is traded for another, which means you’ll be trading in an international market. Anyone who buys goods overseas or exchanges money in airports effectively makes a forex trade. However, you can buy and sell currency pairs for profit more directly using a forex trading account. For instance, you can sell GBP for USD, or vice versa, as this is one of the most traded pairs.
One thing to note is that trading on the forex market can be quite risky, sometimes even more so than the stock market. Currencies can be affected by the regulations of different financial institutions in international countries. Furthermore, most traders only use high volume pairs, which means that your options for currencies can be limited. Compared to stocks, one of the major benefits of this market is that it is conveniently open for trade on a 24/5 basis. Unlike stock exchanges, which are only open for certain trading hours, the forex market only closes on weekends. One of the biggest benefits of trading currencies is leverage. You can open an account with limited capital and magnify your gains on leverage. However, that also means you increase your risk for losses.
Cryptocurrency is certainly cementing itself as more than a speculative investment but one with real value. In 2020, approximately 2 million adults in the United Kingdom will own cryptocurrencies. And around 500 businesses across the nation now accept crypto payments. Young investors, in particular, are gaining interest in cryptocurrency, especially since online trading platforms are convenient for individuals who have been forced to stay at home due to lockdowns.
It goes without saying that the most popular cryptocurrency is still Bitcoin, but it is highly criticised for its volatility and high transaction costs. Conservative investors, however, can invest in a similar yet less volatile cryptocurrency, such as Ethereum. Though do note that you’re no longer limited to just these two options with the growth of crypto and blockchain technology. You can trade Litecoin, Ripple, and Stellar, among a growing number of virtual coins. The benefit of buying into the crypto market is convenience. And as experts are predicting that transacting with crypto will become more or less the norm in the future, many investors are hoping to get an advantage by investing early.
Diversifying your income streams through trading is one of the best ways to protect your finances. However, if you want additional protection against unexpected costs, you can also consider insurance. Our article entitled Do You Have To Have Home Insurance notes that home insurance can cover the cost of any damage or accidents that occur in your home. And if you want to minimise unexpected medical expenses, you can also consider getting health insurance.