Advantages of Trading

“The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” - Paul Tudor Jones

There are many benefits to trading (). But before we delve into these advantages, let's remind ourselves of the following critical information:

  • trading is a high-risk venture and should not be undertaken without evaluating your ability to absorb the risk of losing your initial investment.
  • As the quotation by Paul Tudor Jones iterates, the secret to successful trading is to "have an indefatigable and an undying and unquenchable thirst for information and knowledge." Therefore, the best (and only) way to mitigate exposure to risk is to perform due diligence on the underlying asset that you wish to trade on.

Benefits of Trading

Here are several pertinent advantages of trading s:

Trading success in both bull and bear markets

s can be successfully traded both when an underlying asset’s price rises and when it falls. Before you open and close your trading position, you need to determine whether you are going to trade on the fact that the asset's price will fall or whether it will rise. The actual price movement does not matter, your determination of whether the price will move or not is what counts.

No stamp duty

Because you are not buying the underlying asset, or shares in the underlying asset, you do not need to pay stamp duty on a trade. Thus, the cost of trading s is much cheaper than taking ownership of commodities or shares in stocks.

Trade on margin

One of the primary benefits of trading is that you can leverage your initial investment by trading on margin. Essentially, this implies you can trade on the price movements of an underlying asset without having to invest large sums of money to buy the underlying asset. Consequently, all your money is not tied up in a single transaction, and you can utilise it for simultaneous trades.
Trading using margin means you can increase the profits on your initial investment. However, it is vital to be cognisant of the fact that increased profitability also equates to increased risk and the possibility of losing more than your initial deposit.

Utilise your capital effectively

Another of the benefits of trading is that you can practice a short-term trading strategy known as scalping. Essentially, you place a large number of small trades, each of a very short duration. The low trading amount put on each trade reduces exposure to risk while the short trading time of each trade increases the exposure to risk.
Therefore, these two elements counterbalance each other. Also, overall profitability is attributed to the large number of small trading positions that have been opened and closed, each generating a small profit.

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