The study of economics is on the rise. In Britain alone, the number of students studying A Level economics has grown by 50% since 2006 – and with a distinguished heritage behind it, it’s the sort of discipline that has stood the test of time. Offering a distinctive blend of qualitative theory and cold hard maths, economics is a great tool for understanding everything from the worlds of policy-making to consumer habits. But that’s not all: this discipline is also a handy one for anyone who wants to get involved in financial trading.
Economics offers a number of transferable skills which are useful in the trading profession. From the understanding of key concepts like profit, supply and demand to the mathematical and arithmetic abilities needed to calculate your position, this subject is jam-packed with useful skills for traders. With that in mind, this article will consider exactly why studying economics either at home or abroad can help if you want to become a trader.
Key ideas
Most economics courses will begin with the teaching of simple economic principles. Supply and demand are perhaps the most obvious – and in the trading world, this economic principle is at work all the time. If demand for a certain asset, such as a share, rises, then the price also goes up in order to narrow down the list of potential buyers. One of two things can then happen: the demand (and consequently the price) can drop, or the company can adjust the supply by issuing more shares. Plenty of other principles affect the trading markets in similar ways – and by learning the ins and outs of these principles from an early stage through an economics course, they can become second nature by the time you start trading.
Grasping difficult ideas
If you manage to complete an economics degree, it’s likely that you’ll graduate with the skills required to tackle and digest complex ideas for the rest of your life. Take the economics course on offer at the University of Cambridge: in the first year alone, students may find themselves completing courses on everything from quantitative methods in economics to British economic history. If you can get your head around these, it’s likely you can get your head around anything!
As a trader, you’ll need this sort of information extraction and easy learning skill in abundance. Each asset class and instrument has its own unique set of characteristics, and getting them wrong or mixed up could cost you dear. Take contracts for difference, or CFDs: these products are traded on the margins in order to maximise profit potential, and you’ll need to comprehend leverage ratios and other complex ideas in order to make wise trading decisions. The same goes for forex: these always need to be traded in pairs, for example, and making conversion calculations between any two can be tough at first.
This kind of task may seem frightening – but if you’re already experienced at working out difficult problems, you’ll quickly get there. The good news is that you can sharpen your skills by using websites and books. Forex trading for newbies guides are available on the web, while a cursory look on Amazon or in your local bookshop will reveal plenty of print guides too.
Numeracy skills
When studying
economics, maths skills are pretty important. Of course, economics isn’t entirely about maths, there are important historical, political and even philosophical elements to the discipline. But as a general rule, being able to contend with equations and graphs will be essential. As a trader, it’s likely you’ll need to use the same tools in order to forecast and predict the markets effectively. If you use technical analysis, for example, you’ll need to assess graphs in order to find clues regarding price action. Once you’ve got that skill under your belt from your economics course, you’ll be able to do it for your trading work every time.
If you’re one of the many people in Britain or further afield to have studied economics, then, it’s possible that trading is a way forward for you when deciding on your career. That’s because you’ve got plenty of useful skills which can stand you in good stead for the profession: from the way it makes you more numerate and maths-savvy to the key concepts it can teach you, economics is an ideal degree for anyone planning to enter the world of financial trading.
More articles...
☰
