Buying and selling
When you place a trade, you’re notionally either ‘buying’ or ‘selling’ a financial asset. Buyers – also known as ‘bulls’ – believe an asset’s value is likely to rise. Sellers – or ‘bears’ – generally think its value is set to fall.
How do buyers and sellers affect the markets?
At any given time, one group tends to outweigh the other, and that’s one of the reasons the price of a market fluctuates.
When the buyers outweigh the sellers, demand for the market rises. As a result, the price of the asset climbs.
When it’s the other way round, supply increases and demand for the asset starts to drop – and the price falls.
The way supply and demand affects markets is often referred to as volatility.
Going long and short
In traditional trading, you generally buy an asset in the expectation its price will rise so you can sell it later for a profit. This is called going long. However it’s considerably more difficult to take advantage of falling prices – also called short selling or going short.
With leveraged trading, because you never actually own the underlying asset, trading on the value of an asset falling is just as straightforward as trading on it rising.
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