Trading for Beginners: A Guide to the Terminology
When it comes to online trading, there are many new terms to learn. That’s because the online world has changed everything when it comes to placing speculative trades: the days of having to go through a specific individual to access investments have gone, and now it’s the case that trading can be done from the comfort of your screen. But what words are you likely to come across?
The first word you’re likely to come across a lot is “broker”. To many people, a broker is a particularly old-fashioned word which evokes images of suited and booted stockbrokers in bowler hats, walking around the City of London. And while it’s still the case that some such people exist, the term “broker” is now much broader in definition.
Brokers these days tend to be online platforms which facilitate a self-service process of buying and selling of assets. When you sign up to a modern broker, you’re not signing up to an individual person: instead, you’re signing up to a website or other service which allows you to research available assets and choose one which matches your investment goals.
This City Index Broker Review reveals just what a modern broker looks like, and what services they can offer.
At its most simple level, speculative trading involves buying an asset at one price and then selling it for another with the express intention of making a profit. Usually, this asset is a “real” one, such as an actual stock certificate in a company – or a fund which tracks a number of companies. But the Internet has changed that – and as a result, the term “CFD” has arisen.
A CFD, or a contract for difference, is an investment product which allows you to access the rises and falls of a particular market (and benefit, or not, from their fluctuations) without having to buy the asset. CFDs are derivative products, derived from the movements of the market – and you can choose from stocks, shares, forex pairs and more.
CFDs also work on a leverage basis, which means you can ramp up the level of financial power behind your investment and hopefully secure further profits.
Fundamental analysis is a term you’re likely to come across a lot while trading. It refers to the practice of looking at the wider context in which a market operates and using the news covering that sector to help you make decisions. Financial news websites can help here, as can free economic calendars which flag up key events like central bank interest rate decision changes.
Don’t forget that fundamental analysis isn’t your only analysis option, either. You can also choose to go for technical analysis, which relies entirely on price chart data – or the buying and selling sentiments of other traders.
If you don’t know your broker from your business plan, don’t worry: there are plenty of new terms to learn when it comes to navigating the world of online trading, but with a bit of research you’ll be able to have them mastered in no time.