Stock trading has become almost mandatory for anyone looking to build wealth today. Several decades ago, stock trading was something done only by the rich on Wall Street. However, today with fast computers and online brokers, online trading has the lowest barriers to entry.
Stock trading is the practice of buying and selling stocks to capitalize on short-term or long-term market events for a profit. A company will issue shares of their company on the stock market, and these shares allow you to invest in their company. There are various types of players in the stock market. There are day traders, swing traders, algorithmic traders, investors, and market-makers.
There is one single question to be asked about value investing. Is the company’s intrinsic value less than the price it’s selling for on the stock market? If so, you should invest if the company is undervalued.
Active trading based on technical analysis is a strategy most day traders employ. Essentially, they use short-term trading signals based on charts and technical indicators to interpret market volatility.
Financial derivatives trading has always been a tool for companies to hedge their bets or generate profit. But in recent years derivatives have become accessible for retail investors. There are limitless derivatives out there, including options, futures, forward, swaps, etc.
This trading strategy is extremely challenging to incorporate, as it requires a significant amount of individual research and time! You have to build up the infrastructure to automate your trades, research mathematically proven strategies, backtest your trades for profitability, etc. Most people who employ this type of trading have extreme amounts of education and usually have a Master’s or a Ph.D. degree.
In recent years, passive investing has become extremely popular for retail investors. With low investment fees and growing animosity towards banks and mutual funds, it’s no question the active investing industry was ripe for disruption. Passive investing is a long-term investing strategy where you’re investing in diversified indexes or, at the very least, exchange-traded funds (ETFs) that track indexes. These indexes consist of many stocks based on various criteria.