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Essay Available:
Pages:
2 pages/β‰ˆ550 words
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2 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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MS Word
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$ 9.36
Topic:

Financial Trading and Investing

Essay Instructions:

See attached rubric for guidelines. The questions are listed below that need to be answered as per the rubric.
Questions 1, 2, 8 and 9. The first two questions ask you to consider benefits from competition among short-term traders as well as how trading differs from speculating. The remaining questions ask you to think about stop orders versus limit orders.
1. How might long-term investors benefit from vigorous competition among short-term traders?
2. How does trading differ from speculating?
8. a. How does a stop order differ from a limit order?
b. Suppose that a given market accepts only market and limit orders. Which of these two order types ar more likely to be placed by buy-side market participants? Why?
c. Again, suppose that a given market accepts only market and limit orders. Which of these two order types are more likely to be placed by sell-side market participants? Why?
9. Exactly what does an investor expect from her broker when she places a stop limit order with a stop price to buy at 50 and a limit price of 50.10? Why might an investor place such an order?

Essay Sample Content Preview:

Financial Trading and Investing
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Financial Trading and Investment
1. How might long-term investors benefit from vigorous competition among short-term traders?
Long-term investors benefit from vigorous competition amongst short-term traders in two ways. First, long-term traders can minimize their losses because short-term trading can either result in a net loss or net profit. But a long-term trader holds on until the market goes the direction he predicted, which he can be correct or wrong. In most cases, short-term traders depend on the number of wins to exceed losses to be profitable. The goal of this long-term investing plan is to achieve fewer transactions that result in larger individual gains. Secondly, long-term traders benefit from volatility; if their market prediction is correct, their profits are reached early.
2. How does trading differ from speculating?
Trading involves making calculated risks with the expectation of making a profit, while speculation takes huge risks with the expectations of making a profit. The main difference is that speculation is highly risky and results in a total loss, including the principal amount (Mladjenovic, 2021). On the other hand, trading does not result in a total loss of the principal. You are betting on the position of price movement or the occurrence of an incident when you speculate. The goal of speculation is not to be concerned with capital preservation or loss minimization. Unlike trading, the outcome of speculation is not always quantifiable as a product. When trading, you can either take delivery or not, based on how rapidly the price moves in your favor. However, there is no intention of taking delivery at all, according to speculation.
8. a. How does a stop order differ from a limit order?
A limit order is an instruction to the broker to trigger a trade if sellers are willing to meet that price an...
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