3 Types of Financial Trading You Probably Haven’t Tried yet
The global financial markets offer a wide range of investment opportunities. As an investor, you can invest in stocks, bonds, commodities, indices, mutual funds, ETFs and more. Moreover, since the advent of the current fintech boom, there are now several new ways to make money through financial trading.
Fintech, which stands for financial technology, is a new sector that aims to leverage innovative technologies to improve financial services. One of the main areas of disruption by fintech start-ups has been the investing and financial trading space for private investors.
In this article, you will be introduced to three new types of financial trading you probably haven’t tried yet, but should consider having a look at.
Bitcoin is the world’s leading digital currency that was launched in 2009. Since its launch, the price of bitcoin has gone from $0.01 to over $1000 by the end of 2013 and is currently hovering in the $600s. Not surprisingly, therefore, the amount of bitcoin trading activity has shot up massively in the last 7 years.
As an individual, you can start trading bitcoin on various exchanges, such as BitStamp, Kraken or Poloniex, to generate a profit. You can follow developments in the bitcoin economy closely and then decide whether you want to buy or sell bitcoin. There are also various exchanges offering leveraged bitcoin trading, for those who are comfortable with taking more risk.
Binary options trading
Binary options are a relatively new financial innovation that allows you to bet on the price of an underlying asset, such as a stock, a commodity or an index, to either end up higher or lower after a predetermined period of time. For example, you can bet 25$ on whether the price of the S&P500 will end higher or lower just after a positive US economic data announcement. Since the payout is binary, you will either generate a profit on that trade or lose your initial investment. However, you can never lose more than you have placed on a trade. For this reason, binary options have become a popular investment tool, especially for novice traders.
There are numerous online binary options brokerages, such as Stern Options, which not only offers you an easy-to-use trading platform but also daily market reviews on their Facebook page to ensure you are up-to-date with market-moving events.
Social trading is a new type of financial trading that refers to the use social networks composed of financial investors that allow you to copy the trades of the most successful traders to replicate their trading strategies and investment performance. Popular social trading platforms include eToro, Ayondo, and Tradeo.
The way social trading works is you sign up to a social trading platform, deposit funds into your trading account and browse through the most profitable traders in the social trading network. On social trading platforms, you can always see what each trader is investing in, how well they have performed and how many people are currently copying their trades. Once, you have chosen traders you want to copy, you can enable automatic copying of their trades. That way you can replicate their performance without having to actively manage your investments.
According to a study conducted by the Massachusetts Institute of Technology (MIT) “generally social trades outperform individual trades”, which strengthens the argument that anyone can make money with social trading, provided they copy the right traders.
To ensure that social trading becomes a successful investment strategy, you should follow a range of traders that have a similar risk tolerance as yourself and that invest in asset classes that you are familiar with and are comfortable to invest in.