There is still a lot of prejudice around the term “trading”, and many people identify trading with gambling. Sure, there are overlapping elements such as risks, profits and losses, but there are also key differences. In gambling, the house always wins, and you are most likely to lose over time because the odds are always against you. Trading is a much fairer market, and as you will see in this article, it has a lot of attractive traits. We will guide you through all the prerequisites and give you a good head start if you want to be a trader.
Understand how trading works
Trading means investing in stocks, commodities or currencies. In practice, it is comprised of buying and selling something to take advantage of the changing prices in a market and to collect profit. The usual division is between day traders and long-term traders.
Day traders are active traders that capitalise on small short-term market changes, buying and selling multiple times during just one day. On the other hand, long-term trading is related to predicting larger market movements and creating deep strategic plans. For both short and long-term aims, you need to take trading as a real science, and learn your way up to success. Enroll in a course or start reading articles from a trading academy for systematic and didactic instruction.
Research the available markets
There are a lot of very different actions that fall under the umbrella term of “trading”:
If you decide to start with stocks, learn the basics from others, but don’t blindly follow other brokers and try to develop your own ideas as soon as possible. Start by researching historical movements, then go from there, and don’t forget to get informed about taxes for selling stocks in your country.
To open a trading account, you will need a broker app in order to make trades. Do your research before choosing and pick an app that is the best fit for your trading style. Also be careful about these points: accessibility to beginners, fees, analysis tools, and so on.
Investing in commodities is investing in precious metals, energy, livestock, and so on. It is defined as having goods that can be traded for other goods.
You can invest in commodities in different ways, for example, exchange-traded funds or futures contracts. Be extra careful because it is the market that is most unpredictable and dependent on factors such as wars, weather, the economic stability of different parts of the world, etc.
Forex is the largest marketplace for national currency exchange. Currencies are traded in pairs, with hundreds of additional options for traders. This has always been the largest trading market, but it may be overshadowed soon by the crypto market.
This is the real deal of the modern world. The fastest-blooming market that revolutionises the way traders see the world by bringing decentralisation and blockchain technology. There are thousands of places to start and great digital wallet options available.
Learn about trading styles and strategies
There are dozens of different trading styles, and we will just explain some of them in a nutshell. You can be a scalper who takes tiny profits from the top of the margins and the difference between asking and selling prices; a momentum trader who finds patterns of waves to ride for profit; a technical, savvy chart and graph pro; or go long-term like a swing trader or similar.
Make a trading plan
Now that you know the “where” and the “what”, the next step is to come up with the “how”. A trading plan is an outline of your trading strategy, your goals, budget management, and more. Here is a good example of the necessary steps to take:
Start trading on a demo account
Demo accounts are a great opportunity to experience all the facets of trading, without investing real money. It is a full-fledged practice arena where you can fine-tune your skills while getting ready for the real thing.
Most platforms offer demo accounts together with helpful tips for beginners.
Get into real trading by opening a live account
Once you feel you have learned enough to start trading for real money, open a live account on the desired platform. Most platforms won’t ask for a deposit at registration, so you can deposit at your own pace.
The process is just a simple registration and identity verification, and you may be asked to provide a personal document on some platforms. Withdrawal rules and fees also depend on where you are trading.
Analyze your deals
This is just common sense, but it must be stressed because it is the most important prerequisite if you want to make a profit. You probably know of trading charts and it does seem scary at first, but once you get the hang of patterns and trading signals, you will have a decent chance of running well. There is the usual division of top-down and bottom-up analysis.
Most of the world’s economy has been faltering in the last few years, with the US gradually losing BDP as 2022 is nearing its end. Trading seems to remain independent of this and is not affected by the jittery world economy. The market will always contain money-making opportunities for a proficient trader.