For most people, especially those who either aren’t involved in the markets or haven’t been for long, the word “trading” often is taken to mean stocks. That is certainly a function of history and the media. For a great many years the stock market was really the only one an individual trader could reasonably trade. Add to that the fact that business programming like CNBC tends to have a heavy focus on the stock market and it’s pretty easy to understand why stocks come to most peoples’ minds right away when trading is mentioned.
Of course the reality of the markets is that there is way more to trade than just stocks. In fact, it could very easily be argue that the stock market is least important in the grand scheme of things. This is something I first observed after college when I started my first market-related job.
The thing they never teach you in business school (at least mean anyway) is how very big and influential the fixed income market is. That’s the market based on interest rates of various timeframes from overnight out to 30-years and beyond. That market determines your mortgage rates, the interest you pay on your car loan, and what your credit card company charges you on outstanding balances. It is heavily influential in foreign exchange rates and definitely can seriously impact company earnings and stock price valuations.
Trading in the fixed income market is huge. There is loads of volume and lots of liquidity. That’s why so many of the big players are active their. They can easily get in and out of trades without pushing prices around too much.Â
But the little guy can trade fixed income too. It’s done through the futures markets in things like Treasury Bond contracts.
The point is, don’t let yourself fall in to the trap of believing that stocks are the be all and end all to trading. There are lots of other options out there, some of which might be a better choice for you, and more interesting.
If you like this post or find it informative, I encourage you to sign-up for the newsletter.
Also subscribe to the blog feed and/or follow via Facebook or Twitter.
About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
Similar Posts:
- Understanding the Fixed Income (Interest Rate) Market
Fixed Income and Stock Trading
