Trading…is it for you?
There are different markets available for trading and all of them offer potential for profit. But when you start out, do not try to master all markets at once. This will divide your attention, and it may take longer to make any money. Once you learn to make money in one market, it is easier to adapt to learn other markets. So, be patient.
Capital Markets
Capital markets include the stock and bond markets (both private and public sector bonds). There is a primary market, where companies and governments issue new securities, and a secondary market, where previously issued stocks and bonds are traded.
The Forex Market
Forex is a place to trade currencies and a type of market that is popular with traders who are looking for short and medium-term trading opportunities as it is open 24 hours a day, 5 days a week.
The Derivatives Market
Derivatives are securities that are connected to an underlying asset and are sometimes used as a hedge against price changes. Options and Contract For Differences are examples of derivatives. Speculators can use these instruments to hedge against risk, or to take on risk in order to potentially achieve a financial gain.
The Commodity Market
The commodity market comprises of hard commodities such as gold, oil, and soft commodities such as agricultural and livestock products. Investors and traders can take part indirectly in a commodity by purchasing stocks or directly by buying an Option, Future or a CFD.
The Cryptocurrency Market
Although it is a new market, Bitcoin and other Altcoins captured the headlines at the end of 2017 when strong price volatility caused a surge in prices. The blockchain technology and mining system caused an increased interest in the cryptocurrency market.
How this market will continue, how it will shape the financial markets in general, and whether it can create more value for consumers and the financial system or not is still something that will be determined in the next little while.
So, you can trade pretty much anything you can think of, from shares of Apple to Oil, Wheat, Coffee, Sugar, Gold, Silver, Natural Gas, Bitcoin and ETF’s. But no matter what you get into, there is no easy way to turn profits. In fact, most of the people trading are losing money.
Here are some pointers:
1.Pick a market you are interested in, set yourself up with the right equipment and software. Choose a time of day that you will trade and preferrable only trade during that time. For stocks, the best time for day trading is the first one to two hours after the open, and the last hour before the close. You want to get good at trading between 9:30 a.m. and 11:30 a.m. EST because this is the most volatile time of the day, offering the biggest price moves and most profit potential. Some sizable moves also occur during the last hour of the day, 3 p.m. to 4 p.m. If you only want to trade for an hour or two, trade the morning session.
2.For day trading futures around the open is a great time to day trade. Active futures see some trading activity around the clock, so good day trading opportunities typically start a bit earlier than in the stock market. Focus on trading between 8:30 a.m. and 11 a.m. EST. Futures markets have official closes at different times, but the last hour of trading also typically offers sizable moves to capitalize on.
3.The forex market trades 24 hours a day during the week. The EUR/USD is the most popular day trading pair. This currency pair typically records greater trading volumes between 1 a.m. and noon EST., when the London markets are open. And the hours of 7 a.m. to 10 a.m. EST typically produce the biggest price moves because both the London and New York markets are open.
4.Consider your risk by looking at each trade as well as each day. Then, practice a strategy repeatedly. You do not need to know everything to trade profitability. You need to be able to implement one strategy that makes money. Focus on one strategy only, before attempting to learn others.
5.Do not confuse trading with investing. Investing takes a long-term approach to the markets. Trading involves short-term strategies to maximize returns daily, monthly, or quarterly. You can do both but always understand the difference.
6.Stay away from ‘sure things’. Although there are some strategies that are consistently profitable with the right execution and discipline, there is no sure thing. Also, if you get a tip from a website, tv, radio, a neighbor or a friend, it is already too late and most likely not a good tip anymore. It could still be a good investment but could easily backfire as a trading subject.
Undoubtedly, both Trading and Investing imply risk on your capital. However, trading comparatively involves higher risk and higher potential returns as the price might go high or low short term. Successful Investing is an art, it takes a while to develop. Trading may seem easier, but trading without a strategy is more like gambling and just like with gambling, you might hit some lucky streaks but over long term the odds are against you. Trading can be exciting but has to be done the right way.
Falk Hampel
