How to master global trading?

As a global economy, there are many methods for trading between economic regions. This guide will discuss what to do to help maximise your profits and minimise your risks.

What is global trade?

A trade is defined as exchanging goods or services across international borders to maximise gains from such exchanges. In general terms, exports refer to selling goods or services produced in one country to another, while imports refer to buying those same goods or services from another country.

 

The most important reason for this is specialisation: each region can have their specialities, which they excel at making more efficiently than others. Since transportation was not cheap back then (and still isn’t), it would make sense to import rare goods that cannot be made locally and export cheaper goods since demand is high locally (hence the name ‘import’).

Global trading influencers

The main factors that influence global trade are:

  • Economic factors
  • Geography
  • Political stability
  • Cultural/Religious factors
  • Government policies
  • Climate

Economic Factors

Let’s explain this section using an example. Northwest Europe and Eastern Asia tend to have larger economies due to their climate and geographical location. However, Northwest European countries can expect to see more competition with Eastern Asia than vice versa.

 

By contrast, any North African country looking for exports would be wise to target Northern Europe. Southern Europe might not get as many imports, but their ease of access to Central Africa (and vice versa) makes their trade more profitable.

Political stability

It is crucial because if the government falls into chaos, no one can protect business investments or properties that can easily be destroyed. It also means there are no new policies that might affect how you do business (taxes, tariffs, etc.)

Cultural / Religious factors

Some industries are considered taboo in some countries, affecting demand for imports of those products. Of course, this does not necessarily mean they will not buy them, but it lowers demand simply due to tradition or religious belief.

Government policies

For example, countries with protectionist policies place high tariffs on imported goods, making it harder for foreign companies to sell their products domestically. It directly affects the price of these imported goods and limits options for both buyer and seller.

Climate

It is especially true in trading agricultural products: the climate determines what the goodwill cost and with what yield (quality) it can be harvested.”

Mastering global trading

What does mastering global trading entail? Many factors need to be considered when maximising profits while minimising risks. It all starts with knowing your destination market, understanding the culture, being aware of any government policies, learning about other influencers such as religion or geography so you can update your database accordingly. Once you have this information, it’s time for careful planning to either reduce risk or increase profits.

 

The best way to minimise risks is to understand how an economy works so you know what drives the markets and what triggers changes in price, e.g. death of a political leader, corruption being exposed etc. External factors can affect demand, but internal factors can be just as important, such as inflation, currency fluctuations, government stability, etc.

 

It is why any global trader should always keep up-to-date with current events because sometimes they trigger positive or negative reactions depending on how well the market needs these events to boost growth (positive) or demand destruction (negative).

 

Taxes are another area where traders need to know what governments impose on their trade because they can ruin profit margins. A government may decide to impose a tariff or tax on imported goods if the country’s resources cannot meet the demand for that product, or they might also decide to hike import taxes on certain kinds of machinery.

 

To find the best time and place to buy and sell requires some market research, more so if you’re going into new markets. You need a good understanding of prices in your destination countries and the type of products available there before you start looking at locations with higher potentials due to protective policies, less government regulation, favourable climate conditions etc. Once you have found those destinations, it’s essential to study them from afar by gathering information about geography and the people living there who will be your customers.

Conclusion

If you want to master global trading, it all boils down to knowing where and when to buy and sell. Of course, this is not limited to just supply and demand but also requires understanding an economy, current events that can trigger changes in the market, either good or bad, government policies that will affect how your business operates, plus much more.

 

 

 

As a global economy, there are many methods for trading between economic regions. This guide will discuss what to do to help maximise your profits and minimise your risks. What is global trade? A trade is defined as exchanging goods or services across international borders to maximise gains from such exchanges. In general terms, exports…

As a global economy, there are many methods for trading between economic regions. This guide will discuss what to do to help maximise your profits and minimise your risks. What is global trade? A trade is defined as exchanging goods or services across international borders to maximise gains from such exchanges. In general terms, exports…