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What is the Financial Market and How do you Trade it?

What is the Financial Market and How do you Trade it?

To put it broadly, the financial markets is any system or place where buying and selling of financial instruments takes place. These financial instruments could be stocks, bonds, currencies, equities, futures… the list goes on and on. Generally, when people think of the Financial Markets, they think of the stock market. While this is not necessarily incorrect, the stock market is just one piece of the puzzle. While stocks can be bought and sold, they are actually part of a bigger group referred to as equities. Equites can include market indexes, sector analysis, industry groups, and yes individual stocks.

Right now, you might be thinking, “Whoa, let us back up! So again, what are we referring to when we say financial markets?”

Well, in short, all of it. It sounds confusing and there is a lot involved. Think of the markets as being behind the scenes. When it comes to physically trading it, that is where the big show happens. We encourage you not to get caught up as much in what the markets are but instead in what they do and what you can do with them.

So, how do we trade them?

The reason you need an understanding of what the markets are is so you understand what and how you can trade them. Of course, you can trade stocks, but you can also trade other equities, as well as forex, futures, options, and the currently exceedingly popular, crypto currency. Within each of these larger categories are much smaller sub-categories that are bought and sold, or “traded.”

So how do you decide what to trade?

For some, this is just a matter of personal preference. What do you find interesting? Are you fascinated with crypto? Maybe you do not have the funds to buy stock of a certain company, but you could afford to buy an option contract. There are many varied factors that come into play when it comes to trading. The one thing that holds true for every trader is how to trade, not what.

There are two main types of traders: fundamental or technical.

Just as it sounds, a fundamental trader focuses more on analyzing macroeconomic events. Things going on in the government, taxes, unemployment, inflation, the economy, money, and debt are all aspects that a fundamental trader will analyze before making any trades. A technical trader, on the other hand, focuses more on trading activity by reading charts. They analyze movement influenced by supply and demand. You can absolutely use both types of analysis and doing so can be beneficial. It is important to do your research when it comes to trading. No matter what type of analysis you choose, it plays an integral role in eliminating risk when it comes to trading.

Which brings us to the next point ... The first thing anyone we talk to, who is not professionally trained or educated, tells us about the financial markets is, “I’d love to start but it is too risky.” Read that again, notice the “not properly trained or educated” part. If we handed you the keys to a helicopter, could you fly it? It is possible, but not very probable. Now, if you had proper training would the probability of you being able to fly that helicopter go up? This is how we approach the financial markets. It is crucial to have the proper education to eliminate the risk. Luckily, we are here to provide that education to you.

Getting started with short-term rentals can be seamless if you follow these steps to get educated and to get started. Legacy offers several courses on learning all the various aspects you would need to become savvy in any investment strategy. Join us today so you can take advantage of the real estate market now, whether you own real estate, or intend to. As you can see, you don’t know what you don’t know. People everywhere with various levels of knowledge get into real estate without their own money. You can too.

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Big picture takeaway points

  1. Financial markets are a lot more than just trading. Trading is just one part of the puzzle.
  2. There are many different things to trade in the market.


Self-reflection questions to think more about the content

  1. How do I choose what's best for me? The answer will be different for everyone but one thing that won't change is you must educate yourself, so you can understand the differences and then decide what's best for you.
  2. Do I have an account open? Once you have found what you want to trade open a trading account.
  3. Do I have a system in place? Have a system in place as with any investment it has risk, but we minimize that by our level of education.

Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!

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