Getting involved in trading is a tempting prospect but it can also be fairly daunting for newcomers to get to grips with. One of the first issues to learn about is the range of trading terminology that you might never have come across before. The following are a few of the most common phrases that you will want to be aware of.
One of the first decisions you will want to make is around whether you choose to trade stocks, forex or some other investment vehicle. Forex is all about trying to make money based on the fluctuations of the foreign exchange currency market. The value of one currency compared to another changes constantly, and forex traders look to take advantage of this.
In this way, it is possible to invest in the possibility of one currency rising or falling against another. There is no need to actually buy the different currencies involved, though. Before starting, it is important to understand markets around the world, using the likes of this forex calendar UK investors can use to gain a global perspective. A forex calendar simply lists the most important economic events by date. Seeing how they are very likely to influence forex prices, traders look at those dates as opportunities to make a profit.
The market capitalization of a company lets us see how much it is worth overall. It is a good indication of the size of a business. In 2017, the top companies in this respect were Apple, Alphabet, Microsoft and Amazon. Apple holds the current record market capitalization, having reached over $924 billion at the start of 2018.
The market capitalisation of a business is calculated very simply. It is the number of shares issued multiplied by the current market price of the shares. The different stock exchanges dotted around the planet can also be classified by the total amount of value relating to the companies traded there. On this basis, the New York Stock Exchange is the world leader, at $21,377 billion.
IPOs and ICOs
An IPO is an initial public offering. This is carried out when a company is first floated on the stock market. Investors can choose to take a chance on paying the initial price, which may increase or decrease once trading starts. There have been a number of spectacular IPO successes over the years, such as Twitter and LinkedIn, as well as more than a few flops too.
ICOs are a modern variant on this type of offer. These are initial coin offerings and they give you the chance to get involved with a new cryptocurrency. There are many projects of this type lined up for 2018. Among the most eagerly anticipated ICOs are those for Telegram, the Restart Energy global energy platform and Moozicore.
Over the Counter
Commonly abbreviated to OTC, this refers to investing using a decentralised market rather than an exchange market. What this means is that the two parties deal with each other directly rather than working with an exchange as an intermediary. This produces the possibility of less standardisation and more flexibility when trading.
The rise of internet trading means that more people than ever before can buy and sell stocks, currencies or other investment products in this way. We can see the growing popularity of this approach in the fact that OTC trading in the US rose from 16% of all stock trades in 2008 to around 40% by 2014.