Have you pictured a trader’s work? Do you plan to become a king of all the stock or foreign exchange market, or would you prefer a safer trading target Like gold, for instance? It’s up to you to decide, but for now the essential bedrock of the trading world.
Previously, traders got together, called companies and made certain trade operations. Since the advent of the Internet, the need for this has obviated. There are of course certain transactions, that require at least a phone call, but in general now you can just stay at home and quietly trade the selected assets using a computer.
So, whatever market you choose (commodity, currency, stock), you must always keep up with the latest economic developments. The monitoring of analytical information should enter your lifestyle, like morning coffee, tea or a glass of water with lemon on empty stomach. You should always be able to draw a conclusion about this or that event, sector or company, and choose a tool and mechanism to use it to make a deal, if for good reason and the stars are aligned that you will be more likely to get profit than to lose.
Information increases the power! So the knowledge ownership it is a definite advantage for both beginners and professional traders. If you have not watched yet, take a notice the series “Billions”. This drama series is an important look at how important is to be information-savvy and if you are just starting to dream of a trader career it will show in general terms what is this the traders’ world.
To initiate a transaction, you need a basic knowledge of the chosen object of interest, a group or even a sector, an analysis of what is happening around the chosen topic, as trading “by intuition” or by means of automated trading programs does not always give promising results. The same thing is with the human factor, it does not always run like clockwork. There are everywhere pros and cons. Therefore, over time, you may choose the best trading mechanism namely for you.
Traders do usually use two main market analysis: technical and fundamental.
The first one provides an opportunity to forecast potential price changes based on the analysis of price charts in similar circumstances in the past and can be applied to any market.
According to the second type of analysis, market prices exist and are affected by certain fundamental factors. Fundamental analysis is used by market participants to assess the weight of a company (or if to be precisely the value of its shares). These data reflects the state of the company’s affairs and profitability. At the same time, such data is analyzed as: revenue, net profit, profit before interest expenses, taxes, depreciation and amortization (EBITDA), as well as the net worth of the company, cash flow, current liabilities, dividends and company’s production data.
Technical analysis is carried out at any time intervals, but more often it’s one day, whereas fundamental analysis needs longer periods of time (week, month, etc.). Mastering this type of analysis is much more difficult than technical one.
Technical and fundamental analysis is quite a big theme, and it’s impossible to describe everything in one article, but one can briefly consider what to focus on and what products to take note of, to dwell on one or several for trade to begin.
So, a trading activity one could start with the study of four directions:
The currency “front” does not require large capital, it is quite possible to start trading with $100-200. It’s important to take into account the time frames for trading Forex. Internet be with you! Select the best hours for trading for a particular pair that you are concerned in. For example, the USD / JPY, USD / CNY currency pairs are best viewed during the Asian trading session, and the maximum changes in the EUR / USD pair are observed during the Asian joint work with the European session and the European one with the American one. But this does not mean that currency pairs cannot be the center of your trades at opposite time intervals, because there are several strategies that do work and “at non-appropriate” time line.
Stock exchange indices are a kind of barometer for the development of a whole group of instruments that are linked by a certain sign, or belong to a particular group, sector. Deep down, the stock indices are not so popular among traders, moreover, it’s not the indices themselves that are traded, but futures for them, or in other words, futures contracts for indices. For example, futures on the S & P 500 index is a very popular tool among traders, characterized by large trading volumes on the CME. An index is a useful tool for analyzing a particular sector or group of stocks as a whole. So, there are indices even for a currency, such as an index of the euro or the dollar, which show us the value of a currency against several foreign exchange rivals.
Whether to trade stocks offline or online each trader decides for himself. As it was mentioned above, information and awareness for a trader is like water or air, without one you can survive a couple of days, without the other - only a couple of minutes. Beginner traders start often their activities from “newborn” stock companies, the cost of which allows them to join the ranks of future professional traders, since their cost is often very affordable. But some companies work for several years without trading in the stock market, and by the time of their initial public offering the value of their shares may be quite capable even for a new trader, and one doesn’t exclude the exact opposite situation. Just as a surfer tracks the weather forecast, calculating the most optimal wave that can allow realizing a couple of tricks, so the main thing for a trader is to know everything, in order to get into the wave in time, learn how to “feel” a good wave, be able to recognize at a distance and standing on the board to manage to keep balance and not “to choke”.
Although lesser-known companies can offer low-cost stocks, beginner traders will have to wait longer to get profit with this type of approach. Another matter is companies that for some reason were not in listing on the stock market, but instead of this acquired a name, made a brand, and now they are easily enter the market with very weighty prices per share.
As an investor you are contributing to the company's total capital by means of stocks buying. In this case, the income can be considered as dividend profit or as a “gain” on exchange differences.
For beginners, it is important to know that at the time dividends are paid, the shares of companies lose from 10 to 30 percent of their value. The rest will come.
Commercial contracts or futures are traded on the same market as stocks. The two sides agree to deliver the goods at a fixed price within the stipulated time, according to these contracts. For example, future contracts for supply of precious metals, or for supply of crude oil. As a rule, such contracts are concluded in advance, for that they are “futures”, at least one month before its execution. Consider, for example, a gold mining company issued a futures contract to a company that buys this raw material on certain terms. At the time of the contract month, even if gold has risen in price, the contract price remains the same, but the buyer, in its turn, can win on the difference, selling precious metals at a higher price. And vice versa, in case of a commodity price fall, the sale of these products will become unprofitable.
If you have already decided what to take as a basis for bidding, the next step will be the strategy choice. The next article will follow, stay tuned.