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Trading Market

“Trading is not about How much about YOU MAKE;
But How much you DON’T LOSE”

What Is a Market?

A market is a place where two parties can gather to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market may be physical like a retail outlet, where people meet face-to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.

What is Trade?

Trade is a basic economic concept involving the buying and selling of goods and services, with compensation paid by a buyer to a seller, or the exchange of goods or services between parties. Trade can take place within an economy between producers and consumers.

What is Trading Market?

Trading Market is where You virtually trade online in Stocks, Commodities, Futures, Equities and Currencies . The main trading markets are

  • Futures Market
  • Currency Market
  • Stock Market

The options market is also popular, although more so with swing traders (traders who hold positions for days or weeks, not minutes like a day trader).

1. Futures Market

A futures market is an exchange where futures contracts are traded by participants who are interested in buying or selling these derivatives. In the U.S. futures markets are largely regulated by the commodities futures clearing commission (CFTC), with futures contracts standardized by exchanges.

A futures market is an auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date. Futures are exchange-traded derivatives contracts that lock in future delivery of a commodity or security at a price set today. futures markets are the New York Mercantile Exchange (NYMEX), the Kansas City Board of Trade, the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBoT), Chicago Board Options Exchange (CBOE) and the Minneapolis Grain Exchange.

Example-- For instance, if a coffee farm sells green coffee beans at $4 per pound to a roaster, and the roaster sells that roasted pound at $10 per pound and both are making a profit at that price, they’ll want to keep those costs at a fixed rate. The investor agrees that if the price for coffee goes below a set rate, the investor agrees to pay the difference to the coffee farmer.

If the price of coffee goes higher than a certain price, the investor gets to keep profits. For the roaster, if the price of green coffee goes above an agreed rate, the investor pays the difference and the roaster gets the coffee at a predictable rate. If the price of green coffee is lower than an agreed-upon rate, the roaster pays the same price and the investor gets the profit.

2. Currency Market

The international currency market is a market in which participants from around the world buy and sell different currencies. Participants include banks, corporations, central banks, investment management firms, hedge funds, retail forex brokers, and investors. The international currency market is important because it helps to facilitate global transactions, including loans, investments, corporate acquisitions, and global trade.

The currency market, or foreign exchange market ("forex"), was created to facilitate the exchange of currency that is necessary as the result of foreign trade. For example, if a Canadian company sells a product to a U.S. firm, it'll want to be paid in Canadian dollars. The U.S. firm would need to facilitate a foreign exchange conversion through its bank to pay the Canadian company. The U.S. firm's bank account would be debited in U.S dollars. The U.S. bank would transfer the funds to the Canadian company's bank. The funds would be converted to Canadian dollars at a present exchange rate and credited to the Canadian company's account.

The global currency market helps to facilitate foreign trade because it allows companies to sell their goods globally and get paid in their local currency. Companies need to be paid in their local currency since their expenses, such as payroll, are in their local currency.

The forex market differs from the stock market in that it does not involve a clearinghouse. Transactions occur directly between parties without an intermediary to ensure that each party complies with its obligations. Currencies do not come with a single price but are priced in terms of other currencies.

3. Stock Market

The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place. Such financial activities are conducted through institutionalized formal exchanges or over-the-counter (OTC) marketplaces which operate under a defined set of regulations. There can be multiple stock trading venues in a country or a region which allow transactions in stocks and other forms of securities.

While both terms - stock market and stock exchange - are used interchangeably, the latter term is generally a subset of the former. If one says that she trades in the stock market, it means that she buys and sells shares/equities on one (or more) of the stock exchange(s) that are part of the overall stock market. The leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the Chicago Board Options Exchange (CBOE). These leading national exchanges, along with several other exchanges operating in the country, form the stock market of the U.S.

Though it is called a stock market or equity market and is primarily known for trading stocks/equities, other financial securities - like exchange traded funds (ETF), corporate bonds and derivatives based on stocks, commodities, currencies, and bonds - are also traded in the stock markets. (For related reading, see "What's the Difference Between the Equity Market and the Stock Market?")

What Is Market Research?

Market research is the process of determining the viability of a new service or product through research conducted directly with potential customers.

Market research allows a company to discover the target market and get opinions and other feedback from consumers about their interest in the product or service.

For example, a company that was considering going into business might conduct market research to test the viability of its product or service. If the market research confirms consumer interest, the business can proceed confidently with the business plan. If not, the company should use the results of the market research to make adjustments to the product to bring it in line with customer desires.

What Is Stock Analysis?

Stock analysis is the evaluation of a particular trading instrument, an investment sector, or the market as a whole. Stock analysts attempt to determine the future activity of an instrument, sector, or market.

Understanding Stock Analysis

Stock analysis is a method for investors and traders to make buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions.

What Is Market Value?

Market value (also known as OMV, or "open market valuation") is the price an asset would fetch in the marketplace, or the value that the investment community gives to a particular equity or business. Market value is also commonly used to refer to the market capitalization of a publicly traded company, and is calculated by multiplying the number of its outstanding shares by the current share price. Market value is easiest to determine for exchange-traded instruments such as stocks and futures, since their market prices are widely disseminated and easily available, but is a little more challenging to ascertain for over-the-counter instruments like fixed income securities.

Technical Analysis

The second method of stock analysis is technical analysis. Technical analysis focuses on the study of past and present price action to predict the probability of future price movements. Technical analysts analyze the financial market as a whole and are primarily concerned with price and volume, as well as the demand and supply factors that move the market. Charts are a key tool for technical analysts as they show a graphical illustration of a stock’s trend within a stated time period. For example, using a chart, a technical analyst may mark certain areas as a support or resistance level. The support levels are marked by previous lows below the current trading price, and the resistance markers are placed at previous highs above the current market price of the stock. A break below the support level would indicate a bearish trend to the stock analyst, while a break above the resistance level would take on a bullish outlook.

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

Technical analysis as we know it today was first introduced by Charles Dow and the Dow Theory in the late 1800s.

Several noteworthy researchers including William P. Hamilton, Robert Rhea, Edson Gould, and John Magee further contributed to Dow Theory concepts helping to form its basis. In modern day, technical analysis has evolved to included hundreds of patterns and signals developed through years of research. Charles Dow released a series of editorials discussing technical analysis theory. His writings included two basic assumptions that have continued to form the framework for technical analysis trading.

Markets are efficient with values representing factors that influence a security's price, but Even random market price movements appear to move in identifiable patterns and trends that tend to repeat over time.

How Technical Analysis Is Used

Technical analysis attempts to forecast the price movement of virtually any tradable instrument that is generally subject to forces of supply and demand, including stocks, bonds, futures and currency pairs.

Across the industry there are hundreds of patterns and signals that have been developed by researchers to support technical analysis trading. Technical analysts have also developed numerous types of trading systems to help them forecast and trade on price movements.

Price trends

  • Chart patterns
  • Volume and momentum indicators
  • Oscillators
  • Moving averages
  • Support and resistance levels

Fundamental Analysis

Fundamental analysis concentrates on data from sources, including financial records, economic reports, company assets, and market share. To conduct fundamental analysis on a public company or sector, investors and analysts typically analyze the metrics on a company’s financial statements – balance sheet, income statement, cash flow statement, and footnotes. These statements are released to the public in the form of a 10-Q or 10-K report through the database system, EDGAR, which is administered by the U.S. Securities and Exchange Commission (SEC). Also, the earnings report released by a company during its quarterly earnings press release is analyzed by investors who look to ascertain how much in revenue, expenses, and profits a company made.

There are two basic types of stock analysis: fundamental analysis and technical analysis.