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2.1 What is trading?
Before we understand why trade the Market financial markets, let us discuss on what the financial markets are.
The financial market and trading, in essence, means exchange. Trading is actually known as an exchange. In the olden days, we will barter trade (E.g. Exchange vegetables for a pig or a cow). These were very arbitrary things and we did not have currencies. However, today we have currency. We have currency and we have the ability as well to be able to buy stocks with the currency. We do not need to barter trade anymore, which we used to do in the olden days.
The great thing is that you have so many advantages of trading the financial markets in general. We are going into specifics in the coming videos. We are going to go into the specifics of the advantages and the disadvantages of the financial markets.
However, as a general rule of thumb, trading in the financial markets gives you one key advantage. It is not only to buy the market and wait for it to climb. We can also short the market as well. This is an excellent feature because you can make money as the market is falling. Of course, as a traditional investment, like most of you already are, we can long the market, which is to buy and sell when the price climbs higher, at the ideal price that you would like to sell at. So, there are two ways in which you can make money from the financial markets.
Let us look at the different types of financial market.