The important and basic guide for beginners through the financial markets.
by Guy Avtalyon, the data analyst
The financial markets, what is that? It comes in many terms. We can find among financial markets, the capital market, Wall Street, and even simply “the markets.” The financial markets are placed where traders buy and sell assets.
That can be stocks, bonds, derivatives, foreign exchange, and commodities.
The financial markets are where businesses go to raise cash to grow.
Hence, the place where companies reduce risks and investors make money are the financial markets.
Why do financial markets matter?
Financial markets provide finance for companies.
What’s our role in financial markets?
Setting standards for financial markets. By doing this, we aim to make sure financial markets are fair and there when you need them.
The financial markets are the place where the trade is done.
Financial markets refer to a marketplace, where creation and trading of financial assets. Hence, the financial markets play a crucial role in allocating limited resources, in the country’s economy.
Furthermore, financial markets act as an intermediary between the savers and investors by mobilizing funds between them.
The financial markets provide a platform to the buyers and sellers, to meet, for trading assets at a price determined by the demand and supply forces.
There are different types of financial markets. We recognize several types of financial markets.
* Capital financial markets
* Money financial markets
* Foreign exchange financial markets
* Derivatives financial markets
* Insurance financial markets
The explanation about each of these types of financial markets you will find in this article Financial markets – Basic and Important guide for beginners.
First of all, let’s understand what is trade.
Answer this question could be: It is an exchange of goods or services in return of money, goods or services. But there is a shorter version: it is given and take.
Everybody is familiar with the term “trade”. Most of us have traded in our everyday life, although we may not even know that we have done so. Essentially, everything you buy in a store is trading money for the goods you want.
In earlier days, trade took place with the exchange of goods without exchanging of money. With the invention of money, it took its form as an exchange of items with money.
The term “trade” simply means “exchanging one item for another”.
We usually understand this to be the exchanging of goods for money or in other words, simply buying something.
Speaking about trade in the financial markets, we will find it is the same principle.
Let’s say someone trades shares.
What they are actually doing is buying shares (or a small part) of a company.
If the value of those shares increases, then they make money by selling them again at a higher price.
This is trade.
You buy something for one price and sell it again for another, thus making a profit or loss.
But, if you don’t sell it (or also known as stay in a position) then you’re not losing nor winning. Only by the time you monetize the position – you will lose or win.
Trade has taken birth with the beginning of humankind and shall continue as long as human life exists on the earth.
It enhances the standard of living of consumers. Thus we can say, answering the question, what is it, that is a very important social activity.
Those who want to trade cryptocurrency should start by choosing a company with a good reputation that offers an exchange and wallet. A beginner should also start with prominent coins.
You can find those companies by searching Google, or just enter the Traders Paradise web site, and you’ll find it there.
Currently, we are referring to coins like Bitcoin (BTC) and Ethereum (ETH).
In the future, this could change.
The process of economic specialization leads to much higher levels of production of goods and services. It is this process that creates and sustains the markets of the “free market” system. The development of this system brought about the dramatic and revolutionary improvements in living standards that characterize the modern age.
Free and open trade has fueled vibrant competition, innovation, and economies of scale. More about this topic you can read in this article HERE
The economic revolution is afoot.
You can either be a part of it or get left on the side of the highway feeling dumb.
WYT wants to lead you, step by step, through this important activity. Read this post from the last word and learn about trading.
Yes, we have more articles about it and you can also find how you can become the trader in 10 minutes.
But first of all, you must understand the essence.
It’s up to you now!
What will you find here?
Our experience, our knowledge, everything we know about the financial markets, TRADING, INVESTMENT about cryptocurrencies and markets in general.
We, in WYT, want to show how wonderful is that, what can you do with cryptos, how you have to manage it, what are the PROS but also what are the CONS.
Crypto world is the world of freedom.
No matter what other opponents want to say.
In this post Financial markets – Basic and Important guide for beginners we’ll show you how wrong they are.
At first, we want to show you how bad and wrong lessons we got from our teachers about money, finance, education system all over the world.
In this tutorial Financial markets – Basic and Important guide for beginners, you will find which investment or trading strategies actually work.
You will learn how to trade.
No matter if you have a big or small amount of money.
We will explain everything about Forex (Foreign Exchange) and how you have to act like a professional trader because it’s a sum-zero game.
Our personal surveys and also many types of research shows this statistic element: 20% of traders take the money of the other 80% of the market.
You DO NOT want to be on the 80% side. This post is aimed to prevent you from falling there.
In this tutorial Financial markets – Basic and Important guide for beginners, you will also find basic terms.
Well, if you don’t know them how you can trade or invest?
With this article, you will have everything you need to start trading or investing.
With this tutorial Financial markets – Basic and Important guide for beginners, you’ll be able to step into the wonderful world and become a respectable trader.
But remember, this article isn’t about crypto only. It is about the financial markets and trading in general.
We will show you how to trade and invest some time on examples of cryptos sometimes it will be stocks or shares. But the principle is the same for all financial markets.
So, let start!
Wish you a nice reading.
What Do You Know About Forex Trading?
The Forex trading takes place on the Forex exchange. So, let us explain more about it.
CONCEPT of Forex trading:
Forex represents the foreign exchange/currency market and it the largest among all financial markets. The word forex itself is made of two English words: foreign and exchange and signifies the purchase of currencies from different countries.
Unlike other stock exchanges, Forex does not have its physical seat in a city. It exists in an electronic network consisting of large financial institutions.
Also unlike other financial assets – Currency needs to be at a balance point! Why is that?
Because let’s think about a country, like the US. Its currency is USD and you can invest your money on USD comparing, say, Euro. So if the USD is increased (or Euro is decreased) you gain a profit.
But inside the USA – the interests are different.
There’s an industry of importers and an industry of exporters.
Let’s say I’m an importer that lives in the USA, and I import apples from Mexico. And just for the explanation, we say that 1USD (US Dollar) = 2 MXN (Mexico’s currency).
Now I make a deal with my fellow Mexican that I buy apples for the worth of 2 million MXN (and it costs me 1 million USD). Now, if the USD will get stronger, and now we say that 1 USD = 3 MXN. Now I’m losing money because I could have bought my goods for a lot more money at the same price I spend (1 million Dollars).
But let’s say it’s the opposite – I’m the exporter. My fellow Mexican buy from me apples at the same original deal. This means he buys from me at 2 million MXN and I get 1 million Dollar. But then, the Dollar is rising and now it’s worth 1 USD = 3 MXN. He still buys at 2 million, right? So now those 2 million worth approx. 0.67 million USD. Now I’m LOSING money because of MY OWN currency worth more.
It has to have a balance point because if not we’ll have our own people losing.
Today, Forex is the largest financial market, which has a daily turnover of around $ 5.5 trillion a day.
You can complete this whole process online.
The term currency market means the sale of one currency with the simultaneous purchase of the other. As currency pairs are traded, in order to profit from the shift in the exchange rate, you need to buy the currency that you think will strengthen and sell the other.
There is no need to wait for a growing market to profit. At any moment, one currency will strengthen in relation to the other.
The Forex market is constantly creating opportunities for investment.
Since nothing concrete and tangible anything is bought and sold, this type of trade can be a little confusing. You should think that you are buying a part of the value of a country.
If you buy a Japanese yen, you are buying a part of the Japanese economy that is in direct correlation with what the market thinks about the current and future health of the Japanese economy.
Generally, the established exchange rate of the two currencies is a ratio that reflects the state of one economy in relation to the state of another economy (the state, the currency).
Forex is opened 24 hours a day, except on weekends, so that Sunday trading starts on Sunday from 21:15 CET and runs until Friday at 23:00 CET. During the day there are several time intervals that coincide with the working hours of the world’s largest stock markets.
Who trades on the FX market?
Forex traders can be classified into two groups, hedgers and speculators.
Hedgers: governments, companies (importers and exporters) and some investors who are exposed to exchange rate changes.
Speculators: This group, which includes banks, funds, corporations, and individuals, creates artificial pressure on the course in order to profit from variations or price movements.
Pip – Represents a change in the ratio of the currency by one decimal. It is the smallest unit change course. Pip is the last decimal in a currency relationship
Stop and Limit – Orders – Often the trader wants to limit the loss in the position he has opened (in that case he sets the “stop” order). Or the trader wants to take profit at a certain level, which is acceptable to him/she (in this case he sets a “limit” order).
Long – Used for the purchase order
Short – Tension used for a sales order
Bid – Bid price
Ask – The price that is claimed
Buy – Shopping
Sell – Sale
Spread – The difference between the sale and purchase price
Chart – Graph
Timeframe – Time period
Leverage – Multiplies the amount of money you invest
Candlestick – Candlesticks show that emotion by visually representing the size of price moves with different colors. Red means the starting price was higher than the closing price at a certain time. Green means it ended higher than the starting point.
Example of a candlestick chart scheme
What is needed to trade on Forex?
Before you start trading the currency, you need to open an account with a Forex broker. Our recommendation is that before you decide on trading on Forex, open a demo account with one of the brokers.
So that through the use of the platform, you will be able to monitor market activities and learn more.
Conditions for Success
You must have a good knowledge of technical and fundamental analysis, as well as managing your account. You should also know the psychological aspect of the trade and that you are disciplined. Also, in Forex, you should learn the country you’re betting on or against.
To be able to trade Forex successfully, there is a whole world of education, really extensive analysis. Also, the countless hours of tracking a very large number of relevant and potentially relevant information.
All without any guarantee that the right decision will be made.
So once again, the investment rule has been confirmed: high risk must be taken to achieve high income.
How to trade – all secrets about trading
How to trade is the most used question we ever heard.
FIRST OF ALL, you must understand, trading is the younger cousin of investment.
As the newcomer, you can be overwhelmed by the quantity of the data available in the stock market.
First thing first
When you simply sign up at one of these online brokerage companies, deposit an amount of money you can live with losing it, you are ready to start.
The most important decisions you’re going to have to make in your road to becoming a successful trader of the financial markets is, what your trading style is going to be.
Different trading strategies have their own collection of benefits and drawbacks. If you’re new to the trading scene and might not understand the differences in each trading style, you may be confused. This is extremely important to follow a strategy with your head and not heart!
”Damn, what I have to do?”
You have the choice to simply buy and hold positions in any market for long periods of time, for years or even decades. Or you can complete your trades within one 24-hour period which is easy but the most challenging and fraught with the highest levels of risk, though it can bring big rewards.
If you choose long-term trading and buy-and-hold trading, the offer is the lessened risk in exchange for fewer opportunities for reward.
”And now, what is the next I have to do?”
Well, you have to pick your trading days. Research has shown that the third week of the month is the best time to buy stocks. According to researching, the best of the best in the period between 18. and 22. of the month.
Why is that?
The prices tend to hit their lowest monthly points at that time. Because cash flows from dividend reinvestment and pension funds are likely to be at their lowest as well in that period.
That means, the best time to sell stocks is closer to the beginning and end the of the month, when cash flowing into the system is at its highest.
Speaking about of period of the whole year, April and May are the most successful time to sell your stocks. But buying new stocks in September and October is going to get you the best price (in that time the market tends to bottom out).
If you want to be a day trader, there’s a right time for you as well.
The best time of day to trade stocks, if you are from Europe, is between 9:30 to 10:30 AM. This time frame is offering the biggest moves in the shortest amount of time (a great and efficient combination).
You can extend it out to 11:30 AM EST if you want another hour of trading.
The best time for a US-based day trader will typically be in the late afternoon Eastern Time. Corporate earnings reports and statistical reports from the federal government usually released in the morning, waiting until around 1:30 pm to 2:00 pm.
”Is there any key that is successful?”
We were waiting for you here!
There are no instant solutions and you have to understand that you can’t find a secret formula or secrets about trading.
If there is any secret or key, it is this: keep it simple, be systematic and get educated.
Say, you had enough capital to open the trading account. This doesn’t mean that you’re going to be successful right out of the gate.
Especially if you are the beginner and if you’ve never spent a day in your life in trading before.
And if you think you’ll be able to dive without educating yourself, you’re likely to end up learning the hard way.
You will watch how all your investment capital disappears into the ether in exchange for a handful of stocks that end up not worth much or worse, not worth anything at all.
Keep in mind: trading is not gambling. But there are some tips.
One secret you should know: everyone is selling the stock or vice versa. But it’s obvious that someone has to be buying the stock also. At what price? It depends if the stock has a demand. If not – people will sell it at ANY price, and that what leads to major drops.
The ultimate secret of stock trading is this, learn to identify and make your trades rational and not impulsive.
As we said, there are still some tips:
- Focusing on odds trading and risk/reward vs. hunches and feelings can lay the foundation for a very long and successful trading career.
- The stock market does not care about your feelings or desires. These major principles are the biggest contributors to the losses realized in the stock market.
- Know your risk tolerance, and trade the consistent strategies. If you stay focused on these 2 things you can be sure you will be trading longer than 1 year, even longer.
- Don’t be risk-averse, learn to evaluate risk and learn to understand yourself.
- Trade up to the point you can bear the loss, don’t ever cross your limits. It’s better to wait for your time.
Final words: Always have a plan, consolidate your portfolio, stay away from all the mumbo jumbo.
Only invest in the coins that will turn over a profit, find others that you trust to keep you properly informed, use the tools of the pros.
How to find and use the best online stocks trading platforms?
Stockbroker – Choosing an online
This is one of the most important decisions you will make as an investor in the financial markets. And the most powerful tool in your hands.
Every trader has it’s own investment style of trading, and abundance of brokers’ offers allow individuals to choose what best fits their needs.
If you’re an active trader looking to try your hand at beating the markets, you probably have a good idea of what you want from a brokerage: low costs, premium research, innovative strategy tools and a rich with features trading platform.
The era of online stock brokers makes the world as high-risk/high-reward investing available to the wide public.
Profitable investing takes time and a lot of hard work.
It also requires you to use a brokerage service that fits your investing goals, educational needs, and learning style.
If you are new investors, selecting the right online brokerage can mean the difference between a breathtaking new income stream and a short-lived struggle against disappointment, followed by inevitable frustrating handover.
You have to know one thing, there’s no sure-fire way to guarantee investment returns, but there is a way to set yourself up for success by selecting the online brokerage that best suits you.
We’ll try to show you all the important things you should be looking for in your ideal brokerage on your path to find the best online broker.
For a starter, take a moment to focus in on what is most important to you in a trading platform, before you start clicking on brokerage ads.
You’ll be surprised!
The most important is to recognize your own needs in financial markets.
You must know them.
If you are the novice, you may prioritize things such as basic educational resources, large glossaries, easy access to support service or the ability to have practice trades before you start playing with real money.
A really experienced investor, possibly someone who executed hundreds of trades already but is looking for a new broker, is going to prioritize advanced charting capabilities, conditional order options or the ability to trade derivatives, mutual funds, commodities, and fixed-income securities, as well as stocks.
And you have to be honest with yourself about where you are right now in your investing tour and where you want to go.
Do you want to try your hand at day-trading but don’t know where and how to start? Or, maybe you like the idea of tailoring your own portfolio, or you want to pay a professional to provide it done right?
For now, we suggest you start with these crucial deliberations as a way to determine which of the brokerage features would be the most important to you.
To help yourself to find and use the best online stocks trading platforms be honest when you are answering these questions.
a) How much do you already know?
Obviously, no one knows everything. But the question is how comfortable you feel when risking your own funds. Again, we encourage you to start with a demo account (you can find at the end of this post a link to a demo account).
b) What kind of trades will you want to execute?
Stocks? Forex? Crypto? Daily?
c) Are you an active or passive investor?
Are you the type of person who can start a trade, let it go with its strategy and leave it aside, or you’re the type of person who checks his portfolio daily, read about it, sign up to newsletters, etc.
d) What kind of help do you need?
Do you need help in learning how to trade? On what to trade? Recommendations? Or maybe you want to do it all by yourself?
e) What are your goals?
This is an important question when it comes to financial markets. Your goal is to make a profit, of course. But, how much you’re willing to lose? How “hard and dangerous” your trades look? How much profit you want to gain and monetize and how much you want to leave at your broker account to use for more money? These questions will act as your guidelines.
Be brutally honest with yourself about how much time, energy, and effort you are willing to put into your investments when you want to enter the financial markets in this way.
Your answers may change over time, no one can anticipate all their needs and goals for the rest of their lives. Just start with where you are right now and go with the flow.
Pay attention to several more things such as:
* Does the brokerage website offers two-factor authentication
* Do they clearly explain how they use encryption or “cookies” to protect your account information and how they work?
* Try searching the web for reviews of the brokerage, using keywords like “insurance claim”, “fraud protection”, “customer support”, “chargebacks”, “easy withdrawal”
* Will the company reimburse you for losses resulting from fraud? etc.
And then test the broker’s platform.
Every brokerage should have a decent description of what kinds of tools and resources it’s trading platform offers.
But sometimes the best way to evaluate platform quality is to give it a test drive.
For brokers that allow you to open a free or demo account, it might be worth the effort to go through the signup process just to access and test the trading platform.
How Much Money Do I Need To Start Day Trading?
How much money? This is one the most frequently asked questions I heard from people who want to start day trading stocks, forex or futures markets.
Well, the amount of money you need depends on where you want to trade, your style of trading, do you want to trade forex, stocks, or futures.
And of course, how much money you need to start trading depends on which country you are coming from.
Capital Required to DAY TRADER STOCKS
For example, if you want to be a day trader in the USA and to trade US stocks, you need to maintain an account balance of $25,000 or more.
You have to start with at least $30,000 if you plan to make more than 4-day trades per trading week.
Four-day trades or more per week gives you “day trader status” and you’re subject to the $25,000 minimum account balance. It is recommended you start with more than $25,000, to give yourself a buffer over and above the minimum requirement.
If your account drops below $25,000 you won’t be able to day trade until you replenish your account to more than $25,000.
But in case, if the country you are in or want to trade, doesn’t require the $25,000 minimum account balance, it is recommended you still deposit at least $10,000 into your day trading account.
With smaller accounts than this, commissions and fees will significantly erase profits you made.
Usually, online trading platforms let you trade CFD and forex, and for those, you can start with only $250 minimum deposit.
One of the common mistakes that traders make is being under-capitalized. Losing trades happen, even to the best traders. But after taking losses you still need to have enough money to keep trading.
It’s recommended risking 1% or less of your capital on a trade.
The risk is the difference between your entry price and your stop loss price, multiplied by the number of shares of have.
Capital Required to DAY TRADE FOREX
To open an account in the forex market you will need smaller amounts of money as it is not subject to the same regulations as stocks.
Forex provides leverage up to 50:1 (it can be higher in some countries). Increased leverage means increased risk and reward.
Leverage is essentially using borrowed money to trade.
In the forex market, most brokers provide leverage with few strings attached but you have to be aware of a few things.
For example, you may have $2,000 in your account, but you can buy $10,000 worth of the EUR/USD. Your leverage is 5: 1 on this trade.
The broker doesn’t charge a fee for leveraging, but they are still making money in different ways. You have to realize that leverage is a double-edged sword, increasing profits as well as losses.
In the forex market, the larger your position size the more the broker makes/charges on commissions.
While the broker doesn’t charge interest, the market does.
Currency traders are subject to the interest rates prevailing in the currency they trade.
Every transaction is buying one currency and the selling of another done at the same time.
You may make a few dollars a day which will grow your account over time. But you can also earn much money if you open the account with a bigger amount.
Professionals suggest, if you want an income from forex day trading, start with at least $1000, and preferably $3,000 to $5,000. This amount allows you to potentially start building a monthly income.
It is what the most day traders are looking for.
Capital Required to DAY TRADE FUTURES
Futures contracts are traded on all sorts of products, such as oil, gold, natural gas, and stock indexes.
To day trade futures most brokers only require a minimum deposit of $1,000. Most brokers require you have at least $400 or $500 of available capital in your account to take a one contract trade.
This is called day trading margin.
Opening an account with only $1,000 isn’t recommended, the word of pros. Open the futures account with at least $8,000. Or more if day trading ES futures. Because your broker may require additional margin.
You may wish to start day trading with at least $10,000 to give you some flexibility in what you can trade.
INSTEAD OF FINAL WORDS
Before risking real capital and making a deposit with a broker, create a trading plan and test it out in a demo account.
You have to be profitable for at least a couple months in a row before opening a real day trading account.
This gives you time to see where you need revisions.
When Is The Right Time To Invest In Crypto?
The right time? Let us be clear. For those without experience, it’s never the right time. That means you MUST have knowledge, information, and experience with a free trial demo account.
After you test everything you may say it is the right time for further step: investing and trading cryptocurrencies.
You can make really serious money on cryptocurrencies, that is true.
But you have to take care of several things when you enter the financial markets.
We would be very careful when investing in any crypto because all prices of cryptocurrencies have dramatical ups and downs.
Generally speaking, we would not advise anyone to invest if there is a misunderstanding about what they are investing in. And when the only expectation of further growth based on previous growth is present.
In addition to the famous and biggest Bitcoin, you can find many other interesting cryptocurrencies on the market.
When we say ”interesting” it means that we think their concept is interesting, not the potential for price growth. For example, we don’t know when you’re reading this – but now, Facebook is working on its own crypto coin. What will it use to exactly, is still unclear.
Before you decide to trade cryptos, keep in mind that you feel well informed.
And if you are not ready to lose what you have invested, you should not even try because there is no easy earning!
Is this the right time for trading or investing cryptos?
There is an obvious difference between those two terms – trading and investing.
Investing refers to the purchase and storage of cryptos.
Trading involves active participation in the stock market and frequent purchases and sales in an attempt to profit from price changes.
If you are asking us about trading, it is always a good time for professional traders, for those inexperienced and untrained it’s never the right time.
Our opinion is that no one should engage in trade cryptos, without basic knowledge about it.
First of all, everyone should bear in mind that it is possible to lose everything, whether due to bad decisions or because of security failures of the user or the stock market.
Who is not ready to lose everything that has invested – such a person should not invest.
When referring to crypto trading and investing – since there no REAL value, the prices may vary and go as high as 1 million dollars per coin or 0.00001 dollars per coin. There’s no real value, but it does worth something because it solves a problem. And may I say – a big one. It allows people to transfer anonymous money!
This means you can buy illegal services/merchandise with it – this will always have demand. But not only that, you can hide your activities and make genuine and “white” money without anyone knows it’s you or the government know. We, for example, have a supplier that we know who he is, is not doing anything illegal, but he wants to get pay in crypto.
The ONLY way the crypto industry can totally fall (and in this case – worth exactly zero) it if the technology behind it, the blockchain, will be found as useless.
It hasn’t happened and it might never happen (or until a quant computer will arrive in the world, but that for another story…)
Also, you should be careful in choosing a stock exchange.
Always use strong codes and “2-factor authentication” and you should be able to think on your feet.
Most popular exchanges like Binance, Bitrex, Coin Exchange, Kraken, Kucoin, HitBTC, Gate.io, and Cryptopia recommends Google Authenticator.
Few exchanges accept Authy and few exchanges have their own 2FA service.
This is very significant for online security hence whichever exchange or trading sites you are on make sure to enable 2-factor authenticator.
Do not fall into euphoria when prices rise and do not panic when they fall.
How big is the initial capital? Also, how much money you need to start trading crypto?
It depends on how much you are ready to lose, how much you expect to earn and how much you are inclined to risk.
We have to emphasize that the right answer is your individual assessment.
How to track the value of cryptocurrencies?
You have to be registered on one of the stock exchanges where the cryptos are traded, to verify the order and deposits money.
That’s all – when the money is deposited in the stock market, it can be traded.
It is highly recommended for beginners to try their skills on some free demo account and after that, they are pretty ready to play with real money.
Is It Possible to Lose Money Trading Bitcoin and Crypto?
Lose money is possible.
First of all, trading cryptocurrencies is not an easy task – it is a CHALLENGE and FIGHT!
That’s the point!
Frankly, you are not the only one who lose money right now. But remember like in the war:
The lost battle is not the lost war.
It shouldn’t be the question, WHY people lose money in crypto trading (it’s almost the same in every trading).
The right challenge is how people manage it in general.
Crypto trading is one of the best “money making” methods today if done right.
In order to avoid failure, we will introduce several reasons why people are losing money by trading crypto.
Is there a reason to get panic? Well, actually there is no reason.
One of the biggest and most important tools that traders have is technical analysis. But there are so many and plenty of ways to lose your money! Trust me!
For example, you can use social media predictions. Or you follow someone in the hope that he/she knows what to do.
And there can be the first catch.
You can become a victim of fake news. Because naturally, marketing always goes through these channels to keep up with the current information highway traffic.
It wouldn’t be a good idea to buy coins by following “Tips” given by ICO’s or people that are trying to sell their coins to increase the value of what they have.
They’re trying to create a fake “hype” that can end up in disaster. That’s why you should always do your own researches.
FOMO or “Fear of Missing Out” is something that most people are actually feeling today.
The Bitcoin train has long gone leaving people with doubts on which of the altcoins would be the next big star. When Bitcoin has soared up to heights that no one has ever dreamed, a lot of people was in awe and dismayed that they didn’t buy BTC earlier.
This sense of lost opportunity again triggers, always when the price of a coin goes up. It is making people buy at the wrong time (the price is high, damn) with the fear of it not going back down.
Going into the world of crypto trading without any strategy in mind is more like you are entering the cage with hungry lions! You will not survive!
You should buy some books about trading strategies.
“Hold on for dear life.” HODL, damn!
Most of the exchange/trading platforms or websites have a feature called “Stop Loss”.
There you will be able to control the loss of your assets by setting a “safety net” that would stop your loss on time and not drag you down to limbo.
Limbo is not a good place!
Lovely leverage! Too much of it is bad.
Leverage or margin trading can be devastating if not used properly.
If you are trading with a 20:1 leverage you can earn $20 if the price of your trade goes up by $1.
But if your investment loses and it goes down $2 you also lose $40 instead of earning when the price goes down.
A leverage trade is always expressed as a ratio: for a 20:1 leverage, you will be able to buy $20 assets with only $1.
Do not ever trade more than you can afford to lose!
The most popular saying in the trading world is making margin trading or the use of leverage to go beyond the line of betting/trading more than you can afford. Since you are already in debt the minute you took the leverage.
We believe that now you have the right reason to invest some time in learning.
You don’t need a degree!
All you need is to read and to take a decision or you will face all ways of successfully losing money in trading Bitcoin and crypto.
Golden rules for investing in the stock market
Fast money and easy earnings are mostly what young people want to succeed in the business world. They are attracted to exchanges, money is invested in shares.
However, there are many curves, curvatures, spirals and twists that, and if you don’t know how to avoid them, your trip to the stock market can be very short-lived.
What are the golden rules for investing in the stock market, which should be known primarily to beginners in this business, but also to more experienced stock traders?
* Create portfolio
You can do this in a simple way. There are many free portfolio managers on the Internet, so use some of them to make a free account.
Create a fictitious portfolio in which you would potentially invest and monitor the situation for a while, a minimum of one month. This will give you the best insight into market volatility.
Before you take the first step, the goal is to create a profitable fictitious portfolio as an investor on the stock market. This is one of the golden rules.
* Read business magazines
In order to successfully start investing in the stock market, you need to be aware of the world’s stock market and what are the social events that affect the rise or fall the price of shares. There are many respectable business magazines dealing with this topic (Forbes, The Economist, Kiplinger’s are some of the most famous ones). Follow the events in the global economy and finance and you will be able to swim more easily in the very turbulent waters of the stock market.
* Buy stock from a field you know well
Before investing money into something, you should understand the business the company is dealing with. The first stock you will buy on the stock market should be from the sector you understand and it is familiar to you. For example, if you know the banking sector, try to explore the market and find a bank whose stocks are good and worth investing. Never invest in the action itself, but in the company.
* Have realistic expectations
There may be a problem if your financial goals are based on unrealistic presumption.
Try to be realistic in your ambitions and goals. In this way, there are fewer chances to lose money or be disappointed in your stock market business.
* Do your own research
You will hear from people who are dealing with the stock exchange that they have bought some stocks because the same was done by their friend or a family member who understands this business.
Accept everything with reserve. Before buying a stock, do research.
If some stocks brought in earnings in the past doesn’t necessarily mean that this trend will continue.
Always believe more in yourself than other people’s estimation.
* Stock exchange is NOT a money-making-machine
Most of those who want to participate stock market, have an unrealistic desire to double or triple investment in a short time frame.
If you are one of them, then that’s not a job for you.
For those who want to invest, 10% to 12% of the earnings for a long period is quite a good investment. You need to realize that you are just a small fish in a big lake and that your success depends on many factors.
Follow the clues and make conclusions.
* 3 or 4 good stocks are enough
Don’t overplay, especially because you are a beginner in this business.
More than 10 stocks are a good portfolio, but for investment funds.
It is true that they make more profit, but if you make a smart and wise decision you will earn enough money.
* Don’t try to predict the stock price
Not even the biggest billionaires and owners of the largest multinational companies in the world are doing this.
No one is able to predict, at least for a longer period, several stock market cycles.
Ability to guess the moment when the stock will have the highest value is still a myth. Even for those who have an insight into the business of some companies.
Therefore, for successful business and investing in the stock market, you need to acquire certain knowledge and skills.
Although, there is some artificial intelligence computer software that might not predict per-se, behave and act faster and more accurate way than a human being.
READ more and Subscribe to get more information about AI in the financial markets.
According to the research, the risk of investing in the stock exchange is most often taken over by young people who have just finished college.
But, like in every other business, the experience you get, will help you be wiser in making decisions in the future.
That’s how it works!
What Is better: Investing or Trading and what are the differences?
Investing or trading is the right question.
Let us explain the differences between traders and investors, at first.
Stock traders are individuals (or entities) engaged in the trading of equity securities, or the transfer of other financial assets.
They work either for themselves or on behalf of someone else. Hence, they may operate as agents, hedgers, arbitrageurs, speculators, or investors.
Stock investors are individuals (or entities) who use their own money to buy equity securities. The goal of the stock investor is to gain returns, which come in the form of income, interest, or appreciation in value also known as capital gains.
DIFFERENCES BETWEEN TRADING AND INVESTING
Investing and trading may often be classified together.
But, they are both different ways of attempting to profit from the financial markets.
The goal of making investments is to progressively increase wealth over a long period of time by using the buying and holding of a portfolio of stocks, mutual funds, bonds and other methods of investment.
Trading involves short-term buying and selling of stock and commodities such as currency pairs and other instruments with the goal of earning profitable returns which outperform a traditional buy and hold investing.
For example, while most investors may be satisfied with a 10% annual return, traders may seek to achieve this per month.
Period of acting
Return on investment and payback period seem to be the two most commonly used financial metrics for making sustainability investment.
Trading is a method of holding stocks for a short period of time. It could be for a week or more often a day! The trader holds stocks until the short term high performance.
On the other hand, investing is an approach that works on buy and principle.
Investors invest their money for some years, decades or for the even longer period.
Short-term market fluctuations are irrelevant in the long-running investing.
Growth of capital
Traders look at the price movement of stocks in the market. If the price goes higher, traders may sell the stocks.
So we can say, trading is the skill of timing the market.
But investing is an art of creating wealth by compounding interest and dividend over the years by holding quality stocks in the market.
Risk of both fields
Both, trading and investing, include risk to your capital.
But trading involves higher risk and higher potential returns. The price might go high or low in a short while.
Investing takes a while to develop (and there’s a whole course we created to explain how to do it). It involves comparatively lower risk and lower returns in a short run but might deliver higher returns by putting together interests and dividends if held for a longer period of time.
Daily market cycles do not affect much on quality stock investments for a longer time.
Trading is a one day match while investing is a championship.
Similarly, traders are skilled, technical individuals, they learn market trends to hit higher profits in the stipulated time.
It is related to the psychology of the market.
Investors, on the other hand, analyze the stocks they want to invest in. Investing also includes learning business fundamentals and commitment to stay invested for a longer term.
It is related to the philosophy that runs the business.
For example: If in the company’s balance sheet you see the inventory cell is too high, that might indicate problems with selling and marketing. This also may suggest higher and unnecessary payments for containing the inventory. This usually leads to some drops in stock price.
Traders put money in stock for a short-term, buy and sell fast to hit higher profits in the market. They seek a smaller and shorter opportunity.
Missing the right time may lead to a loss.
They look at the present performance to hit the higher price and book profits in the very short term.
Investors keep themselves away from trends and invest in value.
They invest for a longer period of time keeping the attention of the stocks they hold. They wait till the stock reaches its potential.
You are the one to decide if your goal trading at a higher price making a smaller profit in a short time. Or holding on and sell at the much higher price, in the long run, is what you aim for.
|The time required to be spent on action||Daily continuous tracking of the stock||Few hours before taking an investment decision|
|Costs||Higher due to frequent trades||Relatively lower|
|Risk involved||High||Relatively lower|
|Returns||Low (can even tend towards negative over time)||Higher|
|Taxation||Short term capital gains tax||None provided held for more than a year|
A key rule of trading
Do it only so when you are certain that there is an upcoming future event which is predicted to drive the stock value of an organization or entity higher. But it is obviously not an easy task.
If you think an asset’s price will go up – it’s clear that many other traders also know what you know.
So it’s important to be one of the first who starts their position. If an asset has already made its rise – it’s not the best time to buy!
When trading, there are certain strategies which must be put in place.
Traders should take note of the news and use it to make an educated decision which will hopefully enable them to make a profit afterward.
This shows the difference between trading as a short-term investment and investing as a long-term method of gaining wealth.
When investing, the goal is to bank profits over the long term, with dips in value simply providing the opportunity to buy more of the commodity in question.
Investing means sitting it out when the commodity rises in value as there will likely be more good news ahead for the company and more profits to be made.
If you are new to the world of investing and trading, it’s important to know which you are going to choose.
The imperative to increase your financial gain is what defines it.
Knowledge is the key.
If you are knowledgeable about the stock market but have little idea about how to trade Forex, for example, you will naturally head over to the stock market for your first investment.
General advice: Don’t get investing and trading confused – it could seriously hurt your portfolio!
What is The Difference Between Investing and Trading Bitcoin?
Trading or investing Bitcoin is not the same.
The Bitcoin is extremely volatile and the price can dramatically drop in the span of a few hours.
Truly roller coaster!
Because of that, the majority of traders give up after a few months or after the first market crash.
Each time the Bitcoin bubble creates a hype that puts Bitcoin at the front pages of news, the media becomes more interested. Then, the price keeps on rising and investors become millionaires. That’s until the bubble crashes and the circle starts all over again.
That doesn’t mean you cannot get your hands on Bitcoin and own at least a bit of what is believed to be the future of currency.
What you do have to understand is the difference between investing and trading Bitcoin.
One of the greatest advantages of Bitcoin is its decentralized nature, which doesn’t require a central authority or a middleman to be involved. Therefore, you can send money to anyone living around the world, eliminating banks.
The most important, you don’t have to pay extraordinary fees or wait days for the money to arrive at your bank account – it takes minutes.
All the transactions that have ever happened are recorded in the so-called public ledger.
The ledger is based on blockchain technology and allows anyone who’s a member of the Bitcoin network to access the records and see every user’s history. Thus, nobody can cheat, steal money or double-spend them.
If there was anything suspicious happening, the entire network would be notified.
Bitcoin is exciting and magnificent and unique due to the technology behind it and the idea of being free from governmental control.
But before you decide to jump into investing or trading Bitcoin, there are few more things you have to know about its nature.
Bitcoin isn’t a fiat currency.
Hence, its price isn’t directly related to the economy or policies of a single country. Bitcoin has a difficult history of ups and downs, many of them related to worldwide events.
Bitcoin will never disappoint when it comes to delivering exhilarating shivers down your spine. If you want to, you can spend all day long tracking different exchanges and trading.
It is a roller coaster.
Bitcoin is well-known for its rapid and frequent price movements, sometimes even throughout a day.
For traders, it’s yet another exciting opportunity to gather quick profits.
There is no official Bitcoin exchange, hence there is no official Bitcoin price. Bitcoin exchanges operate around the clock.
Trading vs Investing Bitcoin
Is It Better to invest or trade Bitcoin?
This choice should depend on the knowledge of Bitcoin and the available property.
Investing in Bitcoin can start from a small amount which can be increased with time and experience. It’s a long-term project, which might lead to accumulating a large amount of money.
Trading should be reserved for those who know the Bitcoin nature in depth and aren’t afraid of losing. The constant fluctuation of Bitcoin can be an exciting experience for any trader. On the other hand, it can scare away those who do not know how to deal with or handle it.
In other words, the difference between investing and trading Bitcoin lays not only in the technicalities of it. But also in somebody’s character and temperament.
A lot of beginners are deceived with an idea of how much they can make from trading Bitcoin.
It surely is a more dynamic environment and rates are changing quicker than in a traditional stock exchange, but that only indicates an even higher risk.
The fluctuations in the value of a conventional currency can be measured in a fraction of a penny.
Bitcoin prices, on the other hand, rise and fall dramatically throughout the day.
What else you have to know about trading and investing Bitcoin?
You should never keep all your eggs in one basket.
What does it mean?
Don’t be mislead that the most secure option is to store your Bitcoins on some exchanges wallet.
Why is that?
If you’re thinking about trading, you also have a large amount of money to put on the market. Be cautious and invest in a secure and reliable wallet.
An exchange can be closed and busted anytime, and so is your money. It has happened in Bitcoin’s early days. The catastrophic collapse resulted in losing over 800,000 bitcoins and customers were not able to receive their money back.
Some see trading Bitcoin as a Wild West, without any regulations and legitimate backup, while others are sure that it is a manifesto of liberation.
Something is well known, it’s a game of which nobody can predict the end result.
Trading From Home
Trading from home, for this you have to get educated. But you can earn a decent amount of money.
What do your fellows or cousins say when you express your desire to make a lot of money from home?
Most of them say: “Okay, then go to school. Be a good student. Find a good job and work hard. “
You already know that, and it’s great to have the education. But this is not a guarantee that you will make big money. On the other hand, you know that there are many people who make a lot of money on a relatively easy and effortless way.
And whenever you mention to your crowd that you know someone who’s making big money, what answers you have as feedback?
“They’re thieves.” “They have connections everywhere.” “It’s not an honest business.” “They’re lucky.” “He’s/she’s one in a million.” And so on.
However, these are just excuses.
OK, the truth is that you have to work for your money. But it is not enough just to do something. It’s important to do it SMART.
There is a saying: Do it smart, not hard.
And that’s true. If hard work is the only important thing to gain wealth, all the people in the world would be at least millionaires.
What does SMART work mean and how can you make money without HARD work?
It’s very simple.
Smart work means doing the work once, then for months (sometimes for years) to enjoy the fruits of your work.
This is called PASSIVE INCOME.
When have you heard someone say “I started looking for ways to get a passive income.”
But you’ve heard a thousand times: “I started looking for a job.” (Or worse: “I’m waiting for a job.”)
And when you try to explain passive income to someone, they immediately think you are lazy.
We have heard of innumerable ways of passive earning. You can write a song, record a home video, patent an idea, write a book. You can sell handmade on Etsy, you can be a freelancer, virtual assistant, or you can sell cookies.
Or even simpler, you may begin to earn money from home, by trading.
With the rapid development of computers, mobile devices, and faster Internet, there are more and more opportunities for automating some jobs and generating passive income.
We will give you the ultimate beginner’s guide to trading online.
First of all, you have to recognize different kinds of trading.
STOCK TRADING: That is the art of buying, holding and selling stocks (also called shares) of securities listed on public stock exchanges.
FOREX TRADING: That is the art of buying and selling currencies in the hopes of making profits on the difference in the value of such currencies in global economics.
OPTIONS TRADING: That is the form of derivative trading in which people trade contracts that give them the rights (but not obligation) to buy or sell an underlying asset at a predetermined price.
BINARY OPTIONS TRADING: Form of trading in which traders expect to earn a predetermined payout or nothing at all (they are also called all-or-nothing options) based on the success of their ‘prediction’ of the outcome of a specific market event. Bit gambly and not secure.
But before getting started, it’s important to follow all of the required steps to give yourself the greatest chance of success.
The First Trade – How To Execute It
The first trade should be like a selection of a school.
You’ll need to decide on the kind of assets or securities you want to trade. After that, you’ll need to make is choosing the right broker or brokerage firm through which you’ll access the markets.
That’s very important because the broker you choose will have a direct influence on securities you’ll be able to trade. Also, on the tools, you’ll have at your disposal. On how much you’ll pay in fees. Hence, what final returns you can expect from your trades.
You have to find a broker that would charge relatively low fees and provide you with a full package of resources to make your trading experience easier.
And you have to choose the right strategy.
FEW WORDS ABOUT TRADING STRATEGIES
The main difference between trading and investing is that a trader seeks out market movements for profit.
On the other hand, an investor waits to profit from long-term price movements in the assets in their portfolio.
A trader will make tens or hundreds of trades within a week while an investor will buy and hold an asset for months or years.
The first step in creating your trading strategy is to have a trading plan.
The trading plan is like writing a business plan for some entrepreneur. A trading plan will help you to make a realistic decision in periods of rapid market movement when your emotions might lead you to make impulsive decisions.
The trading strategy should include specific goals such as: getting out of debt, retiring early, making your first million.
Also, your trading strategy should include your asset allocation and diversification moves.
As a beginner, you should not have more than 5% of your trading capital on any single trade. Make sure your trading strategy contains a mix of fundamental analysis of global events, like wars that impact oil prices.
But also technical analysis like trading rules based on price and volume transformations.
It is important because you can use this information to determine your entry into trades, your exit when the trade goes your way, and your escape when the trade goes against your plans.
For you, your best interest is to incorporate stop/limit loss orders into every trade you place.
New traders can use technology to lower the entry barriers to trading by automating many of the activities.
THERE ARE SOME OF THEM:
* Trading bots
This is simply computer programs with instructions based on a predetermined set of market indicators and parameters.
You can use automated trading systems to trade stocks, options, futures, and foreign exchange products.
It is based on a predefined set of rules, which determine when to enter an order, when to exit a position and how much money to invest in each trading product.
Trading bots are especially helpful to beginner traders and sometimes, a bot can be an important market ally for reducing your losses.
* Stock screeners
That can help you filter the stocks in the market to narrow down potential winners before their big breaks.
This will help you identify top gainers and losers, stocks on turbo momentum, and stocks that are about to break out above resistance or break down below support lines.
* Social trading
This is simply a type of trading in which traders rely on user-generated financial content, collected from a variety of networks.
Social trading provides you the platform to be part of a community of successful traders and you can purify the wisdom of the crowd and make you able to make your own trading decisions.
WHAT YOU HAVE TO REMEMBER ABOUT FINANCIAL MARKETS
Always use a trading plan, don’t underestimating the importance of a trading journal, change trading strategy after every trade.
Test your trading skills on a demo account in a social trading environment before you start risking your own money.
Practice trading strategies so that when you’re ready to enter the real financial markets, you’ve had the practice you need.
How do financial markets help you? Speaking about financial markets, you must know a few things.
First, there is no quick and easy money. If that what you want you should get to the casino.
Second, education is crucial. Without it, you will never become a great trader.
Third, be aware. Frustadors are lurking around.
Financial markets perform an open and regulated way for companies to get the capital. This is done through the stock and bond markets. Also, the financial markets support these businesses to balance risk.
Further, the financial markets are public. They consider all available knowledge about everything traded.
So, we can say, the financial markets are placing where companies can find the buyers or someone willing to sell.
We hope you enjoyed this article about financial markets. It was made for a total beginner in the financial markets. We tried not to use too many complicated terms, and for those – you will have to buy our other books and courses.
Be smart, invest only as much as you can lose.
We are preparing a lot of surprises for you.
See you around!
About the author
Guy Avtalyon is a data researcher that uses statistic models and unsupervised machine learning algorithms to determine trends in the market.
”The truth lies within the data.”