Why Trade On Stock Markets?

Global stock markets see live trade running into the billions from investors and speculators every single day, and create a platform on which many have both made and lost millions. While the reasons for playing the markets might sound obvious, getting to a proficient level of trading requires a time and labour investment tantamount to that of starting a business or learning a profession, and getting it right is no mean feat. In fact, even highly experienced traders often get it wrong, with devastating results. Why then do individuals from all walks of life decide to focus their time and energy on trading on the stock markets, and what's in it for them?

Stock markets, unlike any other form of business or trade allow investors to make serious money in short periods of time. Trading the markets is effectively investing in businesses, acquiring shares of their declared profits which have an intrinsic value to the bearer in the form of a dividend and (hopefully) an appreciating price. It's something anyone, with a little money to play with an access to the Internet, can do, and success stories like Warren Buffet who have made their fortunes through shrewd investing continue to tempt people from all different backgrounds to try their luck.

But stock market trading is far from a game of chance, and sensible trading demands stacking the odds in your favour. Prices fluctuate by the second and can move quite significantly over the course of a given day, with some particularly notable examples of banks losing up to and in excess of a third of their value in one day at the start of the 2007 banking crisis. For the trader with insight and rationed opinions, this presents an opportunity to more quickly create wealth than other pursuits.

Likewise, the ability to leverage trading makes the markets an even more enticing prospect. Leverage is usually presented in the form of finance from the broker to amplify certain trading positions, allowing the trader to invest more heavily than his resources would otherwise allow to ramp up the potential gains in price movement. As an example, a trader with capital of £100 might have a strong inclination towards a particular share, and invest £1000 on a bullish position, with the remaining £900 put up by the broker, giving a leverage ration of 10:1. This means a gain of 1 point is effectively equivalent to a gain of 10 points for the trader, thus a 1% increase in the value of the trader's portfolio will generate a 10% return (excluding any applicable financing costs).

The advent of leverage, combined with the potentially significant movements in market prices makes trading on the stock markets a highly profitable, if not risky, endeavour, and paves the way for those so inclined to generate substantial profits as their trading skills improve.