What is stock trading?
Stock trading refers to the buying and selling of stocks, i.e. shares of a company on the stock exchange. Trading stocks allows you to make money when a company’s stock market value goes up or down. Stocks on the other hand are shares in the equity of a company that is listed on the stock exchange.
Assume you own stock in a company whose value rises as a result of the development of a new, innovative product. When this happens, the stock price of the company usually rises as well. You can now sell the stock for more than you paid for it. As a result, you benefit from so-called price increases.
Essentially, there are two kinds of stock trading:
- Day trading: refers to investors watching the stock market every day. For example day trading in Canada is when Canadian traders sell or buy shares depending on how well they perform, according to ForexCanada.ca guide. Attempts are made by investors to profit from daily price increases. They aren’t interested in long-term investments; instead, they are looking for quick profits. The disadvantage is that the risks are much higher here. After all, no one can predict whether a stock will rise or fall in value with certainty.
- Long-term investment: entails purchasing shares or investing in an equity fund. Then they hope for a positive development in the stock or fund’s value. A stock fund is a type of basket that contains a variety of stocks. You can spread your money out and reduce the risk of losing it this way. A so-called ETF or index fund is a special equity fund. A computer algorithm is used to simulate a stock index in this case. As a result, ETFs have a lower risk profile than individual stocks, making them ideal for private investors.