Trading is easily one of the fastest ways to earn money, even if you’re a beginner. Trading platforms like TurboXBT offer you a wide range of assets to trade, with a charting system that will help you understand the markets better.
However, as there are so many types of trading available, this article helps you understand each type’s significant advantages and disadvantages.
Short-term contracts
Short-term contracts are only traded for a few hours or days and vary in duration. Trading short-term contracts come with the benefit of allowing you to make money quickly and easily, even if it is something that beginners should avoid.
However, because this type of trading involves holding assets for a short amount of time, there will be high spreads as the price may move very quickly.
The advantage of short-term contracts is that you can make money very quickly, even if losses are also quite likely.
Forex Contracts
This type of trading involves the exchange of currencies. This means that the volatility is high, so it gives you more profit than an asset like Bitcoin. However, there are fewer trading opportunities as more periodic price fluctuations within a day.
The advantages of forex contracts are the wide range of assets and currencies to trade, with fewer price fluctuations per day.
The disadvantage of forex contracts is that there are fewer price fluctuations per day, which means that most beginners will not be able to make money from it.
Stock Contracts
Trading stocks has become one of the most common types of trading due to its wide range of assets that you can invest in. These may include companies like Tesla or Ford, so many different types of stocks are available.
However, the disadvantage is that they are challenging for beginners to understand and lack volatility. Stock markets take a long time to recover from downturns, which means that you may lose money if you do not invest correctly.
The advantage of stock contracts is the wide range of assets you can invest in, but the disadvantage includes their lack of volatility and difficulty for beginners.
Derivatives Contracts
Derivatives are types of trading that involve wagering on an asset’s future value. It can be used as insurance for other types of trading, and a means to make money off the market volatility as you can sell derivatives before they expire.
However, because most beginners do not understand derivative trading, it is a disadvantage as you might lose money from making incorrect bets with them.
As derivatives contracts are difficult for beginners to use, the advantage of trading them is that you can make money from market volatility and sell them early if you know what you are doing.
Hedging Contracts
A hedging contract is a simple way to reduce your losses if the price of an asset starts to fall. Traders will use this type of trading when an expected price drop does not materialize, which means they can keep any profits they made from selling earlier.
However, there is a disadvantage in that you have to pay a premium on the contracts. In addition, this type of trading does not give you much profit when prices rise, making it more helpful in reducing losses rather than profiting from expected changes.
Medium-Term Contracts
These are assets that trade between a few days to weeks, with the most popular of these being weeklies and monthly contracts.
Trading medium-term contracts have more benefits than short-term ones, as you can access some market analysis on both historical and current trends.
However, since the trading period is reasonably long, volatility is also reduced.
Bottomline
Trading is a gamble, and there is no way to make money without taking risks. However, most people who want to trade should focus on medium-term contracts with average daily volatility to increase their profits.