{"id":59,"date":"2019-03-20T08:32:30","date_gmt":"2019-03-20T08:32:30","guid":{"rendered":"http:\/\/algotrading101.com\/wiki\/?p=59"},"modified":"2019-04-11T13:32:40","modified_gmt":"2019-04-11T13:32:40","slug":"trading","status":"publish","type":"post","link":"https:\/\/algotrading101.com\/wiki\/trading\/","title":{"rendered":"Trading"},"content":{"rendered":"\n<p class=\"has-medium-font-size wp-block-paragraph\"><strong>Definition<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"wp-block-paragraph\">Trading is a process where we buy and sell financial assets for monetary gains.<\/p>\n\n\n\n<p class=\"has-medium-font-size wp-block-paragraph\"><strong>Description<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>There are 3 general aims of trading<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><u>Trading to generate profits<\/u><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This essentially involves either buying financial assets at lower prices and selling them at higher prices or to short financial assets at higher prices and buying them back at lower prices.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Example: A trader believes that an upcoming president will implement policies that will be positive for the stock market. He then buys a stock index.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><u>Trading to facilitate transactions<\/u><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is mostly done by banks and large financial institutions. These institutions trade in order to help their clients (usually other financial firms or large companies) buy and sell assets.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Example: Bank A has a client (a large corporation) that is closing down their British operations because of Brexit. They want to sell $200 million worth of British Pounds. Bank A will then help them sell their Pounds (for a good price) by efficiently matching them to buyers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><u>Trading to hedge<\/u><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Hedging is a process where we buy or sell assets to offset the risk of holding another asset. Banks might trade to help their clients hedge away unwanted risks. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Example:  Airline company X uses 10 billion gallons of jet fuel a year. They are worried that the price of jet fuel might rise in the next year. Thus, they employ Bank X to long 10 billion gallons worth of jet fuel futures. This will effectively protect them from any price changes in jet fuel.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Algorithmic vs Manual Trading<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/algotrading101.com\/wiki\/algorithmic-trading\/\">Algorithmic trading<\/a> is a method of trading where computers make decisions on what to buy and sell in the financial markets. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In manual trading, humans know when and how much to buy or sell. This decision-making process usually involves qualitative work; such as reading companies\u2019 annual reports. <\/p>\n\n\n\n<p class=\"has-medium-font-size wp-block-paragraph\"><strong>Related Terms<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<ul class=\"wp-block-list\"><li>Stock Index<\/li><li>Brexit<\/li><li>Hedging<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Definition Trading is a process where we buy and sell financial assets for monetary gains. Description There are 3 general aims of trading Trading to generate profits This essentially involves either buying financial assets at lower prices and selling them at higher prices or to short financial assets at higher prices and buying them back [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_links_to":"","_links_to_target":"","footnotes":""},"categories":[2],"tags":[],"class_list":["post-59","post","type-post","status-publish","format-standard","hentry","category-finance-resources"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Trading Simplified - AlgoTrading101 Wiki<\/title>\n<meta name=\"description\" content=\"Quantitative Finance - Explain Like I&#039;m Five\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/algotrading101.com\/wiki\/trading\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Trading Simplified - AlgoTrading101 Wiki\" \/>\n<meta property=\"og:description\" content=\"Quantitative Finance - Explain Like I&#039;m Five\" \/>\n<meta property=\"og:url\" content=\"http:\/\/algotrading101.com\/wiki\/trading\/\" \/>\n<meta property=\"og:site_name\" content=\"AlgoTrading101 Wiki\" \/>\n<meta property=\"article:published_time\" content=\"2019-03-20T08:32:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-04-11T13:32:40+00:00\" \/>\n<meta name=\"author\" content=\"Lucas Liew\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Lucas Liew\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/#article\",\"isPartOf\":{\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/\"},\"author\":{\"name\":\"Lucas Liew\",\"@id\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/#\\\/schema\\\/person\\\/bf5a3d12a8fa6a18c56e3dafc22b191f\"},\"headline\":\"Trading\",\"datePublished\":\"2019-03-20T08:32:30+00:00\",\"dateModified\":\"2019-04-11T13:32:40+00:00\",\"mainEntityOfPage\":{\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/\"},\"wordCount\":306,\"articleSection\":[\"Finance\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/\",\"url\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/\",\"name\":\"Trading Simplified - AlgoTrading101 Wiki\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/#website\"},\"datePublished\":\"2019-03-20T08:32:30+00:00\",\"dateModified\":\"2019-04-11T13:32:40+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/#\\\/schema\\\/person\\\/bf5a3d12a8fa6a18c56e3dafc22b191f\"},\"description\":\"Quantitative Finance - Explain Like I'm Five\",\"breadcrumb\":{\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"http:\\\/\\\/algotrading101.com\\\/wiki\\\/trading\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Trading\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/#website\",\"url\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/\",\"name\":\"AlgoTrading101 Wiki\",\"description\":\"Quantitative Finance in 500 Simple Words\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/#\\\/schema\\\/person\\\/bf5a3d12a8fa6a18c56e3dafc22b191f\",\"name\":\"Lucas Liew\",\"url\":\"https:\\\/\\\/algotrading101.com\\\/wiki\\\/author\\\/algotradingadmin\\\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Trading Simplified - AlgoTrading101 Wiki","description":"Quantitative Finance - Explain Like I'm Five","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"http:\/\/algotrading101.com\/wiki\/trading\/","og_locale":"en_US","og_type":"article","og_title":"Trading Simplified - AlgoTrading101 Wiki","og_description":"Quantitative Finance - Explain Like I'm Five","og_url":"http:\/\/algotrading101.com\/wiki\/trading\/","og_site_name":"AlgoTrading101 Wiki","article_published_time":"2019-03-20T08:32:30+00:00","article_modified_time":"2019-04-11T13:32:40+00:00","author":"Lucas Liew","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Lucas Liew","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"http:\/\/algotrading101.com\/wiki\/trading\/#article","isPartOf":{"@id":"http:\/\/algotrading101.com\/wiki\/trading\/"},"author":{"name":"Lucas Liew","@id":"https:\/\/algotrading101.com\/wiki\/#\/schema\/person\/bf5a3d12a8fa6a18c56e3dafc22b191f"},"headline":"Trading","datePublished":"2019-03-20T08:32:30+00:00","dateModified":"2019-04-11T13:32:40+00:00","mainEntityOfPage":{"@id":"http:\/\/algotrading101.com\/wiki\/trading\/"},"wordCount":306,"articleSection":["Finance"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"http:\/\/algotrading101.com\/wiki\/trading\/","url":"http:\/\/algotrading101.com\/wiki\/trading\/","name":"Trading Simplified - AlgoTrading101 Wiki","isPartOf":{"@id":"https:\/\/algotrading101.com\/wiki\/#website"},"datePublished":"2019-03-20T08:32:30+00:00","dateModified":"2019-04-11T13:32:40+00:00","author":{"@id":"https:\/\/algotrading101.com\/wiki\/#\/schema\/person\/bf5a3d12a8fa6a18c56e3dafc22b191f"},"description":"Quantitative Finance - Explain Like I'm Five","breadcrumb":{"@id":"http:\/\/algotrading101.com\/wiki\/trading\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["http:\/\/algotrading101.com\/wiki\/trading\/"]}]},{"@type":"BreadcrumbList","@id":"http:\/\/algotrading101.com\/wiki\/trading\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/algotrading101.com\/wiki\/"},{"@type":"ListItem","position":2,"name":"Trading"}]},{"@type":"WebSite","@id":"https:\/\/algotrading101.com\/wiki\/#website","url":"https:\/\/algotrading101.com\/wiki\/","name":"AlgoTrading101 Wiki","description":"Quantitative Finance in 500 Simple Words","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/algotrading101.com\/wiki\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/algotrading101.com\/wiki\/#\/schema\/person\/bf5a3d12a8fa6a18c56e3dafc22b191f","name":"Lucas Liew","url":"https:\/\/algotrading101.com\/wiki\/author\/algotradingadmin\/"}]}},"_links":{"self":[{"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/posts\/59","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/comments?post=59"}],"version-history":[{"count":13,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/posts\/59\/revisions"}],"predecessor-version":[{"id":299,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/posts\/59\/revisions\/299"}],"wp:attachment":[{"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/media?parent=59"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/categories?post=59"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/algotrading101.com\/wiki\/wp-json\/wp\/v2\/tags?post=59"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}