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What is Trading? Here’s How To Play And Overcome The Risks

Resi.co.id – Perhaps, you’ve heard the term Trading? When you ask your neighbors, relatives or friends what their job is and how they earn a lot of money, their answer can be Trading. What is Trading? What does Trading activity mean? Check out the answer in this article.

Understanding What is Trading

Trading is an adaptation of English which means to exchange goods or services from one party to another.

The following exchange activities arise because of specialization and allotment of work (labor specialization). That is, because individual skills have narrowed and divided, they only focus on processing a particular product or service specifically. As a result, they do not have enough time and energy resources to meet all their needs.

Therefore, trading activities underlie each individual to exchange goods or services as a result of their processing with their own specific needs. The earliest trading activity is known as barter, the simplest form of exchange before the standardization of exchange tools such as money was invented.

After the discovery of the currency, trading activities undergo changes. The exchange process becomes much more efficient with the emergence of supply (sell) with demand (buy). Due to this increase in efficiency, the individual has the potential to make a profit surplus or profit compared to his initial capital.

Trading Example

Budi is a leather shoe craftsman, he prepares an initial capital of IDR 1,000,000 to process 10 shoes. He offers every shoe with a selling price of Rp. 250,000. After 1 month of being offered in the shoe market, 5 used shoes were sold.

From the trading results, Budi got an income of IDR 1,250,000. That way, he gets a profit of 25% of his initial capital even though 1/2 of the total production has not been sold.

What is Trading Today?

From bartering to the discovery of a standardized medium of exchange, trading activities continue to develop consistently. In addition to the conventional exchange of goods and services, the market as a central exchange provides additional opportunities for buying and selling financial assets. The market for buying and selling financial assets includes the stock market and the futures market, including Forex.

Currently, the term “Trading” in Indonesia specifically refers to short-term buying and selling activities that take place in the equity and futures markets, with the perpetrators being referred to as “Traders”. This term is often accompanied by the term “Investment” whose perpetrators are called “Investors”.

What are trading activities like today? Here is a general description:

  • The Stock Market offers state-owned and private companies access to capital from investors by trading some of their “ownership rights”. Traders or investors will buy shares as a representation of ownership rights. In return, investors will receive profits based on the ratio of their ownership rights to the producer’s net profit (dividends). Meanwhile, traders will tend to re-peddle their shares when the following share prices increase, to get profit from the difference between the selling price and the buying price, which is called Capital Gain.
  • Futures Markets offer contracts between vendors to send ordered commodities to customers at a certain price in the future, according to the contract. The main background for the following contracts is for customers and commodity vendors to receive assistance from price fluctuations or unexpected natural disasters.
  • The Foreign Exchange Market (Forex) offers a platform for buying and selling foreign exchange (forex) based on the prevailing exchange rate (exchange rate).

Initially the financial market could only be accessed with a minimum number of purchase units (lots) by large financial companies. These buying units mostly require large capital so that mostly only trading institutions or wealthy individuals can access them.

However, the current globalization of the internet provides additional opportunities for individual traders with low capital (retail) to be able to connect to the following alternative markets through brokers. In the Forex market, such intermediaries are referred to as Forex brokers.

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