Trade (finance)
In finance, a trade is an exchange of a security (stocks, bonds, commodities, currencies, derivatives or any valuable financial instrument) for "cash", typically a short-dated promise to pay in the currency of the country where the 'exchange' is located. The price at which a financial instrument is traded, is determined by the supply and demand for that financial instrument.[1]
- Securities trade life cycle
- Order initiation and execution. (Front office function)
- Risk management and order routing. (Middle office function)
- Order matching and conversion into trade. (Front office function)
- Affirmation and confirmation. (back office function)
- Clearing and Settlement. (back office function)
Who Trades?
Participants in the financial markets includes from;
- Speculators or retail traders
- Institutional traders: insurance companies, private funds
- Central banks: U.S. Federal Reserve(Fed), Bank of Japan (BOJ), European Central Bank (ECB)
- Corporations: Multinational companies (MNCs)
- Governments
Trading in financial markets is essential for driving economic growth, providing liquidity, enabling price discovery, and facilitating efficient capital allocation. One of the most common reasons individuals trade in financial markets is to combat inflation. [2]When trading in financial markets, it is crucial to find a balance between risk and potential reward. If you balance risk and reward well, the rewards you can achieve may be much greater than simply keeping your money in the bank.
See also
[edit]References
[edit]- ^ "What is Trading?". tradimo.com. Retrieved 15 October 2019.
- ^ "Who Should Trade, and Why Trade?". tradingkey.com. Retrieved 2024-10-09.
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