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If you watch the news, use social media, or have internet access, you’ve probably heard of trading. It’s mentioned pretty much every other day in ads, by self-proclaimed YouTube finance gurus, on billboards, and wherever else you can think of.

Although the majority of these advertisements are intended to induce FOMO, there is more to trading than that and you should be interested. Whether you decide to go short or long on one of the most traded commodities like crude oil or use a Oil CFDs, or if you prefer to trade stocks, bonds, and virtual assets like cryptocurrencies, there’s a space for everyone to thrive. You can even trade your hobbies.

You do not believe it ? Keep reading.

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The financial market

All forms of trading that you have heard of or participated in so far are conducted in the financial market. Think of it as a marketplace to buy and sell food, clothes, gadgets, etc. But rather than these things, the financial market deals with the trading and holding of securities, instruments and goods national or global. Transactions are still going on in the financial market as traders try to earn profits and reduce risk.

Many of us are familiar with a specific type of financial market, usually because of its popularity or current trends. But there is more than one financial market. It’s not like Walmart, where you can get a lot of stuff from the same establishment. However, this does not mean that the various financial markets are disconnected. On the contrary, they tend to influence each other.

Over the years, the financial market has evolved and grown exponentially to the point of offering contemporary financial instruments that were not available decades ago.

Types of financial markets

The different types of financial markets are the stock market, the derivatives market, the capital markets, the foreign exchange market (forex or FX), the commodity market, the mortgage and insurance market, the money market and the cryptocurrency market.

If some of these names don’t save you, it’s probably because they aren’t that common in your area. But that doesn’t mean they don’t exist or aren’t functional. The reason for their popularity is partly defined by their inherent nature. While some generally take a short-term approach, others are more long-term or present both approaches. For example, the mortgage and insurance market is long-term oriented due to loan terms, while money markets are more short-term oriented.

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Why you should start trading in 2022

There are many reasons to trade in 2022, but here are our top five:

High market liquidity

Liquidity means that an asset can be traded in the market without disturbing its overall value. For example, Forex is considered a high liquidity market due to its size and the many traders browsing the market at any one time. This makes it harder to influence the value of assets, even when people are trading extremely high volumes. Liquidity is an important concept in trading because it is essential for maintaining price stability.

Risk management

No financial market is without risk and every trader is aware of this probability, whether he is interested in stocks, bonds or currencies. So, for traders who want to build long-term success, it is crucial to identify and implement risk management strategies. And there is no shortage of them.

Traders have access to several risk management tools, such as price alerts, demo trading, capital limits, a range of trading styles to suit different risk tolerances, stop and limit orders, ratios adjustable risk/reward, etc.

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Capital margins

Whether you’re a high roller or want to take things slow, there’s a financial market for you. Some marketplaces allow traders to start from just £200, which opens up plenty of opportunities for traders of all classes.

Since trading is used as an alternative source of income, low entry points make it easier for new traders to enter the market and limit their risk while retaining their jobs. So there’s a flexibility in trading that just doesn’t exist with most jobs.

Take advantage of real-world situations

Apart from influencing one’s financial markets and others, trading is a good way to take advantage of changes or uncertainties in the real world, especially when it comes to politics and economics. A crucial part of trading is forecasting. And while it can be difficult to cultivate this skill, it can be mastered with enough effort and commitment.

Forecasting involves identifying probable patterns in the real world that could influence the direction of the market. Admittedly, some situations turn out to be extremely difficult. But they’re not impossible to crack and can make all the difference in your wallet.

Benefits

The purpose of business is to reap profits, just like the purpose of commerce. Many people get into trading because there are no limits to their profit margins. Of course, this is not easy and involves learning skills and mastering the art of trading to be able to identify profitable trades. For example, since the foreign exchange market is not subject to severe regulation compared to stocks, bonds and commodities, the market is open and subject to fluctuations.

For the most skilled traders, these moves in the market are profit opportunities. Thus, by choosing the right financial vehicle at the right time and checking its contract for differences (CDF), you can open positions (long or short) during trades.

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