Stocks, Forex and Other Money Matters

There are abundance of opportunity to make money day trading and there are 5 common markets to consider:

1. Stocks
In simple definition, stocks are a share in the ownerhsip of a company. You can buy or sell stocks on an exchange. The investing legend, Warren Buffet dominates this market but don’t let that get to you. You can still make money from stocks. If you are new to investing or day trade, you may want to consider your local stock market first. You may want to consider ETF (Exchange Traded Funds) if you are risk averse.

2 .Options
Options are a leveraged financial instrument. Its price derives from an underlying security (stocks or index for example). They give the buyer of the options contract the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. Unlike a stock, options contracts have expiry.

3. Commodities
Commodities trading involves the trade of raw materials. Such as grains, livestock, precious metals, energy, etc.

4. Futures
Futures, like options, have expiry. They are used for hedging commodity price fluctuation risks; or for taking advantage of price movements, rather than for buying or selling the actual cash commodity.
The buyer of the futures contract agrees on a fixed purchase price to buy the underlying commodity (wheat, gold or T-bills, etc.) from the seller at the expiration of the contract. This differs from options, where the buyer has the right to purchase the underlying commodity, but is not obligated to do so.

As time passes, the contract’s price changes relative to the fixed price at which the trade was initiated. This creates profits or losses for the trader.
Futures trading is one of the more complex forms of trading, but along with the increase in the skill level required, there are greater rewards (in terms of return on investment (ROI).

5. FOREX

Forex – short for foreign exchange – is trading where the commodity is currency. What makes the Forex market unique is that, unlike other financial markets, the forex market has no physical location or central exchange. Additionally, this market trades 24 hours and its daily volume exceeds $1.4 trillion, making it the largest and most liquid market in the world.

This may sound exciting to you but it’s not for the faint hearted. Forex trading can be fast and furious. If you’re just starting out, unless you have your heart set on trading the Forex, I recommend that you ensure that your trading plan can trade profitability in other non leveraged markets (e.g. stocks) before entering into this market.

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