Trading is now much more popular than it was five years ago. Many have heard about bitcoin - which is many times more expensive than gold -, exchanges, quotes, foreign exchange markets as well as huge earnings and risks. Popular culture had a great impact on the way we see trading as well.
There have been many articles on trading overloaded with complex terms. We don’t want you to get lost in the jungle of tricky terminology but gain an understanding of what trading is, its prospects, advantages and disadvantages. And most importantly, we are here to help you decide whether you need to trade at all.
In simple terms, trading is speculation in financial markets (or exchanges). From this perspective, exchange trading may well become a synonym for this concept.
Even 30–50 years ago, only large institutional traders could trade in financial markets. This means that they tackled millions of dollars and worked on behalf of various institutions, banks, funds, and similar organizations. Anyone who is ready to allocate trading capital and set aside some time to get training and trade can now do so.
Becoming a trader doesn’t mean that you have to quit your job.
You can trade in financial markets in parallel with your primary employment in order to increase the family budget and have an additional source of income. The popularity of trading is directly proportional to the denting trust in banks and other financial organizations that have shown their dependence on the country’s economy during the crisis. Trading is independent in this matter.
Of course, in order to make a profit. That is why financial markets attract people around the world. The essence of trading is to find an asset, which is now cheap, buy it, and when its price rises, sell it by putting profit in your pocket. It is a classic pattern of making money off the price difference. In this case, you don’t trade tangible goods, as in the market, but financial instruments: currency, stocks, futures contracts for raw materials (oil, gold), cryptocurrency.
Trading has one unique advantage over other types of classic commerce: you can earn even if the price is dropping. That is why traders, even beginners, were able to make a lot of money during periods of global crises when the economy was in recession and incomes in other activities went down.
There are two options — each has both strengths and weaknesses.
Let’s say you want to trade in the stock exchange by yourself. This is option number one. To that end, you should get high-quality training from professionals who are not just experts but who can easily and efficiently share their experience. For instance, Alexander Gerchik who has been trading for over 20 years and has never exceeded the 6% drawdown level is one of the best trading mentors. By the way, most successful traders in the CIS are his students.
Once training is complete, you will need a trading account and capital that you will use in exchanges when buying or selling stocks.
However, there is a fly in the ointment — trading will take a lot of your time. This is a work that must be taken seriously, since it bears risks in addition to potential earnings.
Option number two is trust management. It is perfect for you if you want to earn money in financial markets, not depend on the economic status of the company you work for, and on the economy of your country as a whole. At the same time, you won’t spend time on trading.
The essence of trust management is simple — you let a professional trader, who will make trades and a profit, manage your account. Trust management services are now technically advanced for convenience and safety of traders and investors. Let’s take a look at the TIMA account service. You can choose your own manager that meets your requirements.
In order to trade in stock exchanges, you don’t have to go to Wall Street, get squashed in the trading floor, and shout information about your trades. Thanks to the Internet, you can trade from almost anywhere in the world. There are various trading platforms, the most popular one being MetaTrader 4. It is easy to install on a personal computer, smartphone, or tablet. In this case, banners depicting a trader lying under a palm tree don’t lie.
You have to gain access to the world’s leading platforms where you can make trades through a brokerage company. As an individual, you cannot trade in the stock exchanges. However, thanks to margin trading offered by brokerage houses, you will need much smaller amounts of startup capital.
Selecting trading assets is another important step that must be taken before embarking on a trading career. In this setting, it is advisable to start out from the types of financial markets.
In this case, you can trade stocks of public companies. The largest US stock exchanges are NYSE (New York Stock Exchange) and NASDAQ (National Association of Securities Dealers Automated Quotation). The stocks of such huge companies as Apple, Microsoft, Amazon, and Boeing are traded there. The Moscow Exchange, where the shares of Russian giants are traded, plays a significant role in the CIS.
Trading with a forex broker gives a great advantage, i.e. access to CFDs allowing you to make money in stocks that are traded in the stock market.
Forex stands for foreign exchange. Unlike stock exchanges, the forex market is global. Private traders can access it only with help from forex brokers. Its advantages include high liquidity (i.e. you make trades almost instantly due to the large volume of people wishing to buy or sell), daily turnover of 5–7 trillion dollars, and opportunities to profit off the stock price falling thanks to the margin trading services provided by forex brokers. On top of that, unlike stock markets, trades here are done around the clock.
This is a new, but very popular platform. Cryptocurrencies are digital assets or virtual coins based on blockchain technology. Practically everyone knows about bitcoin, the major cryptocurrency. If you are new to trading cryptocurrencies, you just need CFDs on the most popular coins that are made available by forex brokers.
In this case, trades are made not by people but by computer programs that completely exclude the human factor. Computers make several million computational actions in a matter of seconds, analyze and trade assets (currency, stocks, and raw materials). Experts say that algorithmic trading allows stabilizing the situation in the market. However, this type of trade is typically very short in time, your profit is low, whereas the trading volume is huge.
So, trading is speculation in financial markets or exchanges, which involves purchase and sale of financial instruments. Your key goal is to make money off the price difference.
In trading, profit is limited only by the size of your startup capital, knowledge, and time that you devote to work. It all depends on you. You are your own boss, and your office is any place with Internet access — the main thing is to make it convenient for you. This is a great advantage. That is why trading is so popular now.
If this article sparked your desire to become a trader (or you are thinking about it), here are a few simple tips that can help bring you both profit and self-satisfaction at the start.
1.Learn everything there is to learn. The fastest and easiest way to get there is to take professional training courses.
2.Find a reliable forex broker, carefully go through its terms, and open an account.
3.Practice using your demo account. Get a feel for the market, ride the wave, and learn to control yourself and your funds.
4.Allocate your startup capital for trading. When you master the art of trading, don’t forget that the greater the funds in your account, the fatter the profit.
5.Start trading, stick to all of the rules and recommendations your mentor has given you, and never stop practicing in order to perfect your trading skills.