What is Trading and How to Get Started?

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.

This article examines and explains the nuances for you in plain language. It includes information on trading for beginners, explains how to perform technical and fundamental analysis of the markets, how to design successful trading strategies and how to make money with minimal risk.

What is Trading?

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.

Trading consists of analyzing the market followed by an offer to buy or sell.

The market means the totality of the relationships between all the participants in the interbank economic system.

For example, the securities market is all the trades in the world carried out at a given time involving bonds, futures, options, etc.

Banks, large corporations, financial institutions and private investors are constantly buying and selling assets and forming market relationships.

A trader is a buyer, seller or other market participant.

It doesn't matter which specific asset he manipulates to make a profit. Could be currency pairs on the market Forex , criptomoedas on an exchange or commodities such as crude oil.

Trading means buying and selling assets while following your predictions of changes in the market situation to gain a financial advantage.

Here is an example of trading USD/EUR currency pairs. You go to your broker's trading terminal and after carrying out some market analysis, you predict based on the results of your analysis that the value of the dollar against the euro will increase.

You buy dollars, and when the price rises, you sell the asset at the peak of quotes. The difference between the buy price and the sell price is your profit.

This is a simple case, but it gives a general understanding of what trading is and who the trader is.

How does trading work?

Trading is a dynamic system of ever-changing trends.

On the one hand, many external factors determine the value of bonds. For example, the actions of a large commodity company can react to political decisions, economic sanctions, natural disasters, and even rumors of a change in leadership in a corporation, agency, or global country.

On the other hand, market participants such as traders also influence world events, large corporations and political institutions.

To make a profit, a trader needs to make a prediction and it must be correct. The incredible variety of trading strategies (which we will discuss in more detail below) boils down to two trends.

These trends are determined by the prevalence of traders in the market with similar goals:

bulls (bullish). These are traders who are confident that the market will go up. Therefore, they open long positions to buy the asset, with the intention of selling it later at its peak value.

Bears (bearish). These are traders who predict that the value of an asset, on the contrary, will fall. Based on this prediction, they are selling the same asset on a massive scale and opening short selling deals. Bears intend to buy back the asset at the ebb of the downtrend.

A large number of like-minded traders regarding the same market asset affect the price of that asset, which results in a movement in the market.

This is important for beginners because the analysis of market It starts with identifying a trend.

When we are in a bull market, it means that the market is hot. In other words, investors are optimistic and betting on asset growth.

If more bears are opening too many shorts, the market goes down. At such times, it is called a bullish or bearish market, respectively.

These names are based on associations. Bulls metaphorically throw the market up with their horns. Bears conditionally pressure prices, lowering them.

But trading is not just about identifying a trend.

There are many nuances at play. Let's examine the concept of the so-called "market analysis”. Included in that term are the technical analysis (forecasting using charts and indicators) and the fundamental analysis (when a trader makes a decision based on current events and news).

Professional traders use both types of analysis, but generally prefer one to the other.

New traders should know that they can win in two ways. The first is to trade manually.

You need to register with a broker, install a trading terminal and open trades on your own.

The second way is to trade using robots. In automatic trading, a robot (a special software program) makes a decision for you based on the current market situation.

However, there are other ways such as trust management, copy trading and even MAM accounts and PAMM — but we'll talk about some of them later.

Trading: What assets can be traded?

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.

The list can seem endless, as trading is buying and selling everything that has value on the world market.

For example, Forex involves buying one currency and simultaneously selling another. Currency quotes change constantly.

So by analyzing the market, you can buy a currency at a certain time and then sell it for profit.

Likewise, there is an opportunity to make money from bonds, particularly stocks and bonds of large companies. Shares, among other things, generate profit in the form of dividends (payment of interest on the company's profits, equivalent to the investor's contribution).

The futures market is the environment where futures contracts, a type of derivative, are traded. In summary, futures contracts represent a commitment to buy or sell a certain amount of a certain asset at a future date and at a pre-defined price.

Everyone is well aware of the simplest kind of options, binary options for currency. For example, you enter into a contract predicting whether the price of the euro will increase or decrease. If the prediction comes true, the fee is returned to you as a percentage (usually 85%). If not, you lose your invested capital.

Trading is also trading consumer goods, that is, commodities.

This includes a significant range of assets such as commodities, raw materials, energy carriers and precious metals.

All of these can be traded on the markets, selling and buying an asset at any given time to make a profit.

There are also stock indices. They are determined based on the so-called basket of indices, which includes a group of similar securities.

For example, the CAC 40 index includes the stocks of the forty largest companies in France, regardless of their industry, while the Nasdaq index is a collection of stocks of the top US companies in the IT field. The movement of indices can be predicted in order to generate profit.

Finally, the trading cryptocurrencies It's a relatively new trend.

This asset is extremely volatile, which means that price changes occur at high speed.

This makes it possible to make a lot of trades in a short time, buying cryptocurrencies cheaper and selling them at a higher price.

Often these investments can also be successful in the long term, but this requires in-depth market analysis.

What is a broker? Can trading be done without one?

The market is not an occupation for individuals. This is the law. There is simply no mechanism that allows an individual to bid directly on the interbank market.

The problem is solved by an intermediary, called a broker.

A broker is a legal entity that acts as an intermediary between a trader and the interbank market.

By registering with a broker, you gain the opportunity to bring your business to the world market with the broker acting on your behalf.

There are exchanges through which you can trade currencies, bonds, commodities and cryptocurrencies, etc.

Some brokers have a narrow specialization. For example, some exchanges only deal with cryptocurrencies on their platform, while others work with a wide variety of tradable assets.

For intermediation, the broker charges the trader a commission (a trading fee). Typically, this is a percentage of the trade.

Some brokers do not charge trading commissions, but charge a fee for withdrawing funds from an account opened with them to external accounts (e.g. to a bank card or your personal cryptocurrency wallet).

The broker's activity is (must be) licensed. Sometimes, a country's Central Bank acts as the licensing authority. There are also international regulators. For example, the International Financial Services Commission of Belize.

The advantage of working with a broker is that they assume all the legal part of the transaction.

In addition, trading on the interbank market is carried out in batches. Initially, a lot is 100.000 base currency units.

It is hardly possible for a new trader to open a lot of 100.000 USD. But when trading through a broker, you can open fractional lots, that is, participation only in part of the operation.

5 things a new trader needs

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.

So, now you know what trading is, but this is not enough to make a profit while trading.

Below are five components of a successful negotiation. If you delete one of them, you will not be able to make money trading.

Knowledge

In this general trading article, the basics are provided, just the broad information needed to form a solid understanding of the topic.

It takes almost specialized knowledge to trade and make a profit.

But it is not necessary to have an economic education or to practice for 10 years or more. However, you will have to read several books on stock trading, watch some video courses, and carefully study the text guides.

In other words, you will have to work hard and commit. Genius or super luck rarely favors your efforts. Diligence is the keyword here.

The advantage for the modern trader lies in the globalization and computerization of society.

Today, many brokers offer high quality training systems that allow you to learn what trading is all about and gain enough initial knowledge in the professional trading field in the shortest possible time.

This opportunity cannot be overlooked..

Broker

After getting more dedicated knowledge, you need to choose a broker that will give you access to the interbank market.

This point is conceptually important because a good broker creates comfortable conditions for novice traders, helps not only with technical but also fundamental analysis, and offers protection mechanisms to reduce trading risks.

New traders often choose unverified companies and lose money not because of their mistakes in predictions, but because of putschists or untrusted brokers.

Or it could happen due to technical issues with the platform.

Start-up capital

How much money do I need to start trading at a professional level? This is the key question that novice traders ask most often.

No need for a big budget. Most brokers today offer leveraged margin trading or a low initial deposit.

Leverage is when you place a bet and the broker raises it using its own funds.

For example, a leverage 1:100 means you are betting $10, but the total bet is $1.000 plus broker credit. And as a result, you will receive profit of $1.000, not $10.

The ideal starting capital is around $200 – 500 of your own money. If you have recently learned what trading is and are just starting to explore this area, there is no point in risking large sums.

The first bets of new traders are losers, this is normal, you need experience.

So $500 is more than enough. Note that many brokers, for example, RoboForex, allow you to start trading from $10.

trading strategy

Despite the apparent obviousness of the definition, people who are not associated with trading rarely have the correct imagination of what a trading strategy is.

For example, many people know that there is scalping, position trading, day trading e swing trading. These are not strategies, just trading styles.

There is algorithmic trading and discretionary trading, the so-called news trading and the high frequency method.

From a technical analysis point of view, you can trade reversal or breakout, trend or consolidation.

All this, of course, will seem difficult for a beginner, in fact, you just need to acquire theoretical knowledge and start trading, improving it with experience — as you go along.

This is how a trading strategy is formed, which is a set of rules by which a trader trades.

The trading style, the methods used and the priority of sources for fundamental analysis. All this and more to establish a trading strategy.

And each trader will have their own. So how can you distinguish a good strategy from a bad one? bad strategy? A successful strategy results in profit; whereas an unsuccessful strategy results in losses.

Devices

Today, trading is an opportunity for everyone, without exaggeration.

You trade through a broker using a trading terminal. This is a dedicated software program that can be installed on a personal computer or mobile device such as a smartphone.

The device does not need advanced power, just a high quality internet connection.

For example, the most popular trading terminals are MetaTrader 4 and MetaTrader 5.

They have mobile versions for Android and iOS devices. Additional tools like SMARTx, MetaStock, Thomson Reuters Eikon e BloombergTerminal may require more energy.

But the same Bloomberg Terminal is already first class for market sharks.

How much can you really earn in trading?

Once you have a general understanding of what trading is, the answer to the first question seems obvious.

Trading in the global financial market can definitely bring you high profits.

It depends on the above factors — the quality of your knowledge, your dedication to the industry and profession, the convenience of working with a broker, and the success of your trading strategies.

But trading is not an area where you can get everything at once.

As you improve your skills, you earn more. With constant practice, a trader usually reaches a professional level after 2 – 3 years — not weeks or months.

So, plan on staying (and strategizing) for a while. At the same time, it is realistic to earn $1.000 and $10.000 a month. There is no limit here.

However, you need to understand that it is impossible to eliminate all risks. Sometimes you will lose. It's normal, it's natural and it's guaranteed. Take a deep breath and get back to trading.

Even professionals lose sometimes because there are external factors that cannot always be taken into account in fundamental analysis.

For example, a natural disaster or an unexpected decision by a large company. An experienced trader is risk tolerant and takes the emotion out of their job.

Only then can he succeed.

Is trading a risk? Can I lose money?

We have already indicated that the main risk is associated with losing a bet (or part of it) due to an unsuccessful prediction.

For example, suppose the stock of Company N would go up and you bought it to sell it a month later at a higher price.

The stock rose for a while, and then Company N's main competitor announced a merger with another competitor, and the newly formed company received most of the market.

As a result, the shares of company N started to fall rapidly and you were out of luck, you didn't have time to sell them in time to at least break even.

Such situations are not uncommon in trading, and beginners need to understand that they can lose their bet at any time.

The risk is especially high when trading options, where you bet on the fact that the price has changed and you won't be able to try to sell the asset, albeit at a small loss, if you make a mistake.

But the earning potential of options is also higher because there is a chance of practically doubling the rate with a successful forecast.

In fact, the rallying cry when trading options is often “All or Nothing!”

Is it possible to receive passive income in the financial markets?

Trading is not just active trading income. You don't need to trade on your own to make a profit.

There are several “passive” options:

MAM. It is an asset management system in which multiple accounts are under the limited control of a “senior” or “master” trader.

He makes trades on his account, and these are fully or partially duplicated in controlled accounts.

If the trade is successful, all investors receive a profit equal to their contribution (their fees may be lower than those of the managing trader). The manager can take a percentage of each investor's profit as a reward.

PAMM. In this scenario, the managing trader has full control over the general account to which investors transfer their funds.

He trades these funds and the profit is distributed among investors in proportion to their contribution. Technically, PAMM accounts are similar to mutual funds.

Copy trading. In a special service, you can choose a signal provider — an experienced trader with a high rating.

Connect to it and all actions in your own account will be copied to your account.

The signal provider does not control your funds and has nothing to do with them. For new traders, this option is usually the most preferable one because you retain full control over your funds and can gain from the decisions of a more experienced colleague.

Best brokers for beginners

Avatrade

Quick registration

AvaTrade is part of our list of best social trading platforms as it offers traders multiple direct and indirect social trading platforms.

91%
PUNCTUATION
ABSTRACT

AvaTrade is part of our list of best social trading platforms as it offers traders multiple direct and indirect social trading platforms.

AvaTrade has partnered with some of the best signal providers in the world to ensure traders can follow the best traders wherever they are.

They also offer self-directed trading on intuitive trading platforms on a wide range of over 250 trading instruments including forex, CFDs and cryptocurrencies.

AvaTrade social trading platforms include:

Mirror Trader — Enjoy manual, semi-automatic or automatic trading by following your preferred signal providers. You can also copy algorithmic trading strategies developed by experienced traders together with leading developers.

ZuluTrade — Select from a large number of signal providers, ranked using various practical parameters, including maximum drawdown and average profitability.

AvaTrade is one of the world's largest online brokers in terms of trading volume. They are regulated in 6 impressive jurisdictions including Europe, Australia and South Africa. Its regulatory licenses span 5 continents. This ensures that you can make safe and secure trades in the comprehensive trading environment they provide.

AvaTrade offers a variety of different social trading platforms along with competitive fees, industry-leading trading infrastructure and excellent customer support.

For these reasons and more, they easily become our best social trading platforms.

POSITIVE
  • More than 250 trading instruments
  • Multiple social trading platforms
  • Free trading tools and indicators
  • Regulation in 6 jurisdictions
  • Excelente suporte to or customer
  • Free Demo Account
NEGATIVE
  • $ 100 minimum deposit

eToro

Quick registration

eToro earns a spot on our list of the best social trading platforms. They have established themselves as the leading online social trading platform.

87%
PUNCTUATION
ABSTRACT

eToro earns a spot on our list of the best social trading platforms. They have established themselves as the leading online social trading platform, offering user-friendly social trading to millions of traders around the world.

Whatever your level of experience, the eToro platform has a wide range of signal copying and sharing solutions with a vast online social community. They have a large selection of trading instruments (stocks, forex, cryptos, etc.) available on the eToro web and eToro mobile platforms.

Founded in 2006, the eToro online trading platform allows you to easily connect with other traders to view, compare and discuss trading strategies. Patented CopyTrader™ technology allows you to automatically copy trades from another trader's portfolio, creating your own bespoke portfolio.

In addition to copying other traders, you can also place and manage your own trades, which can then be offered to other traders for them to copy.

eToro also has a “Popular Investor Program” where popular investors can earn a second income by being followed and copied by other users on the eToro platform.

There is an eToro club that offers a range of exclusive benefits, services and tools to customers according to their membership level. This includes a dedicated account manager, market analysis, live webinars, expert investment support, premium trading tools, exclusive VIP events and other benefits.

eToro is regulated by some of the most respected regulatory authorities, including CySEC, FCA and ASIC. This ensures they must abide by strict rules and regulations in place to protect investors and gives their clients peace of mind that they are using a trusted social trading platform.

POSITIVE
  • Strict regulation
  • commission free trading
  • Large online trading community
  • CopyTrader™ Technology
  • CopyPortfolios
  • Popular Investors Program
  • eToro club
NEGATIVE
  • No fixed spread accounts

trading summary

Trading is a great opportunity to increase your capital. But it comes with a significant risk.

You need good training and a proven broker, as well as knowledge of the rules of money management and a proven strategy that will be constantly improved.

However, even in this case, you will not be able to completely eliminate all risks. No one can.

Risks can be really minimized if you know what trading is and how financial markets work.

We have talked about general points, the rest can be found in specialized guides and you will understand them through practice. Currencies, bonds, precious metals and cryptocurrencies are all good prospects for making money when trading.

 

Trading is an opportunity to make money on the stock market and other markets, relying on your own knowledge and analytical skills. In the information age, to profit from trading all you need is a computer or mobile device and the desire for financial independence.Frequently asked questions about trading

 

What is trading in a nutshell?
Trading is the process of trading in the global financial market. You can trade currencies, bonds, cryptocurrencies and other assets. The trader's task is to buy and sell an asset at a given time to make a profit.
Can I trade without a broker?
No, the interbank market is designed in such a way that only legal entities — banks and financial organizations can directly participate in it. The broker allows individuals to trade on the interbank market on their behalf in partial lots.
What does it take to become a trader?
It is necessary to read at least a few books on the fundamentals of financial markets and take some training courses. Many well-known brokers offer simplified guides that can be ideal for beginners. In addition to a reliable broker, you need start-up capital, a trading strategy and a device (PC, smartphone or tablet) on which to install the terminal (special trading software).
How to choose the right broker?
You can independently review all companies in a given segment on our website.
5 / 5 - (4 votes)

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