Basics of Trading and Finance (Part 02) : Finance, Trading, Exchange
Before writing a post about trading, exchange and finance it is important to have some basic understanding of these topics. And that's why today I will share with you some details related to finance, exchange and trading.
We simply mean the raising of funds by any company, organization or individual. Basically the process of raising funds for investment is called finance. In this case there are various financial intermediaries such as banks and financial institutions who take funds from Surplus Group and provide funds to others. Basically, banks do finance work by utilizing this demand gap of deficit group and surplus group, so a bank is a type of financial institution. Apart from banks, there are many other non-bank financial institutions that do the same type of financing.
The format in which a fund is raised is called a financial instrument like bond, demand deposit, money, share, stock, dividend, crypto etc. That is, how a finance company will raise funds or what instrument it will use is called a financial instrument.
People have been trading since ancient times. When people had to exchange different goods for human needs, that exchange was called a barter system. Later gold coins and present day currency are being used as medium of exchange. We have to buy and sell various products at national or international level. This buying and selling is called trading. That is, when currency, assets or any other goods are traded from one party to another.
The important thing in trading is which currency to exchange. In that case, all currencies recognized in the world are used as well as cryptocurrencies. Trading in general refers to the buying and selling of goods. But nowadays even strong currencies are traded like commodities. And buying and selling cryptocurrencies along with any other currency is also a part of trading.
Exchange Money We mean commodity exchange or currency exchange system. This is what we called trading earlier. Basically, when trading is done by an organization or a market place within a framework and through certain rules, it is called an exchange site or exchange. We consider exchange sites as marketplaces from which various foreign currencies and strong currencies can be traded. The framework structure of an exchange site is very strong and they manage the work of the exchange within a well organized and regulated framework. All the products that are on the trading site are traded in the same way as on the exchange site, one currency is bought and the other is exchanged by buying and selling the spot, future, swap, etc. method. Popular exchange sites include Binance, Coinbase, etc. Exchange sites are meant to trade different coins. Sites where foreign currency is traded are called foreign exchange sites.
Exchange sites are again centralized and decentralized. In the next post we will know about these issues.