A 30 second primer on trading in markets

Trading In MarketsDefining a market is as simple as picturing a boxing ring with two opposing opinions representing the fighters.  One of these opinions places a bet on an increasing value of a share price while the opposing side wagers that the share price will decrease in value.  This is the simplest way to visualize the market: a boxing match with buyers in the blue corner and sellers in the red corner.  The most important aspect to understand is that both sides cannot win.  For every winner, there is a loser and this simple premise is what creates a market.

Markets therefore arise out of the need to connect people who have something with people who want something.  The more participants in this equation, the more accurate the true value of this something becomes.  This is called the market value.  If there are no buyers and no sellers, there is no value, and ultimately, no market.

Like in any boxing match and more importantly, the market, both sides will take hits.  The difference between people who lose money and those who profit is that these folks understand how to properly absorb and react to the hits.  The key is to not shy away from the markets for fear of losing, but to adapt and learn the techniques for winning along the way.

If you’re interested in learning more, check out a full length article on understanding markets here.

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