What is trading? Video Lecture | Business Studies for Grade 11

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Trading is exchanging one item for
another today as we use money we trade
by exchanging money for items trading in
the financial markets is the same
take for example buying shares of a
company when you buy shares you actually
buy a part of that company so if the
company grows makes a large profit or
brings out a new product it shares will
become more valuable the person who
bought these shares can now sell them to
someone else
for a higher price and make a profit why
do these share prices go up the answer
lies in the concept of supply and demand
to explain this we're going to use the
simple example of going to a market to
buy an apple let's say you're in a
market and there are 10 apples left on a
store although this is the only place
where you can buy them if you are the
only person in the market and you only
want one then the market store owner
will most likely sell it to you at a low
price to make sure that he makes a sale
now let's say that more people suddenly
enter the market and they all want
apples the market stall owner may put up
the price because he knows that there is
more demand than supply and that his
customers would be willing to pay more
just to make sure they get the apples
instead of another customer
if these customers are willing to pay
more and more then the price of those
apples are likely to continue to go up
and up now when the price of those
apples reaches a level where the
customers think they're too expensive
then the price will stop rising and they
will come back down again to an
acceptable level at this point it could
be said that the apples have reached
market price the level at which the
market store owner and the customers
agree on what is an acceptable price for
them both but things don't stay like
this forever if the supply of apples
increases the price will likely go down
again take for instance another market
store owner coming
into the market offering more apples his
strategy to get into the market will be
to offer apples at a lower price more
and more people will buy apples from a
new store and so the first one will have
to reduce its price in order to compete
the price of apples can stay like this
for a while or change depending on the
balance between supply and demand how
does this apply to the financial markets
the concept of supply and demand is
exactly the same in the financial world
in the financial markets the customers
are the traders and they are buying and
selling shares of companies if more
people want to buy the shares because
the company posted great results and it
it's paying out some of its profits to
shareholders then the price of those
shares will go up because the demand for
them will go up you can sell those
shares to other traders that want to buy
them and by doing so you will make money
for a long time financial training was
done purely between banks and other
financial institutions
this meant that trading in the financial
markets was closed to anyone outside
this circle today you can also
participate thanks to the development of
the internet online trading is
essentially using the Internet to trade
almost anything is traded online
including stocks currencies commodities
physical goods and a whole host of other
things
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you do not need to worry at this stage
what all these things mean
however if something can be traded it
will be traded the market is open to you
you can also learn to trade and here is
where trader Moe helps you