Trading With Success – a full tutorial for every beginner or advanced
By Guy Avtalyon
You’re never too young to invest.
This post Trading With Success – a guide for beginners published by WYT Finance is for those who want to invest in the stock market but don’t know how to go about it.
Are you afraid of investing? Worried that you will lose money if you invest in the stock market? Do you think investing in the stock market is like gambling?
No, investing in the stock market it isn’t gambling.
Stock market investing is all about investing in your own wealth.
Owning stock is like owning a company. By buying a company’s stock, you are actually funding the company’s activities. If the company grows, the economy grows. Isn’t the stock market a good thing then?
Here, we have simplified investing and want to tell you how beneficial it can be in the long term.
If the company does well, it gives income to shareholders in the form of dividends. And if the company does REALLY well, it’s share price goes up. This is called Capital Gains.
The best part?
If you hold a share for more than a year and you sell it for a profit, you don’t have to pay any tax on the gains! Interested already?
Who doesn’t wish they could have invested in the early days of Facebook, Amazon or Apple?
If you don’t have any experience investing on your own, getting started can be rather terrifying. It can be difficult to define how much of your money should be in stocks, what type of stocks you should look for, how to manage a portfolio and risks, or what common “rookie mistakes” you should avoid. With that in mind, I wrote this article.
For you who come in the stock market at the first time, have a desire, have some fears, have no knowledge but you want to step to this wonderful world of stocks, shares, commodities, currencies or cryptocurrencies.
No one likes to lose money.
Also, the pain threshold of some is greater than it is with others. If you’re bearing in your mind an investment in the stock market but the thought of a loss upsets you, you likely shouldn’t invest.
However, when you invest there are several things you should know to increase your chances of winning. That’s the subject of this article Trading With Success – a guide for beginners.
Although there are numerous details and cautions, this article will help you understand the basics of how the stock market works and why stocks react as they do. I’ll also discuss a few things that every investor should know. Let’s omit the mystery, take a look behind the cover, and this terrifying name: trading markets.
What I want to say is, historically, the opacity and transaction costs involved in this asset class meant that venture capitalists often had to spend thousands of dollars and of hours to execute one single investment. Because of this, investing was liable to be open only to the big players on the scene. Thanks to equity crowdfunding platforms this is no longer the case.
The biggest reason traders fail is because they cannot handle the psychological pressures of trading.
Pressures often lead to stupid mistakes or terrible judgment and this naturally leads to unnecessarily losing money.
The most important thing when trading is that you have a good and clear reason for every trade you take.
At first, you will find instructions on how to become a trader. What your first step should be, how to register on a trading platform, what you have to have for that, I want to show you steps for investing or trading.
And you will see how easy it is.
First of all, you have to know that all successful traders were once the beginners who studied trading from the very basics while they gained experience over time. We are not going to explain the background of the cryptocurrency or stocks and how it works, because it is not relevant to trading for the average user.
The trading principle is the same as for any store – buy low, sell high.
Investing in market securities can be discouraging for the beginner. But with instruction, anyone can trade on the market. Trading with success on the market can be an exciting way to earn income on your savings or prepare for the future by investing for retirement.
CHAPTER 1 – KNOWLEDGE IS IMPORTANT
If you want to trade, the first thing is understanding the financial markets and how they work.
I always like the example given by economist Andre Kostolany. He was famous for his investing skills and gave us wonderful quotations about markets and finance, like this one:
“Never run after a bus or a stock. Just be patient – the next one will come along for sure.”
In his books, he often alluded to the reciprocity between the cool, calm and collected investors on the one side, and the edgy, panicky, terrified amateurs on the other.
“Always be fearful, never panic!” – André Kostolany
The trader with the solid hands buys when the price is low. Such a trader has both time and money, which stimulate strong nerves too. The solid hands stick around. The trader is not confused by the ups and downs of the market and knows exactly what they are doing. He or she makes his/her move at just the right time, buying at the bottom and selling at the top, or at least quite close.
Some traders sell in panic, desperation or simply they buy. The solid hands will sell again at a big profit when the market turns around again.
And to whom do they sell to? To the nervous small newbies with their borrowed money and the nasty mixture made of both loss and regret. Such traders are uncertain, unsafe, insecure with weak hands.
The weak hands jump off the runaway train in the middle of a crash.
So, you have to know what kind of hands do you have.
How will you find out?
Trading is really not for everyone, that’s true. But also the truth is that everyone should have a reasonable amount of their money in equities to increase own wealth.
Only those with the right psychological makeup and sufficient funds can really gamble and take chances. Only such people will operate with patience, tranquility and all those other things that make higher-risk investing successfully. And this certainly includes a good technical and factual understanding of the stocks and markets themselves.
Well, introspection is extremely important in the investment industry. It is necessary to know what you can handle cold blood, to understand your own mental limitations, to be aware of your cognitive prejudice.
And you need to know what you could actually lose on your investments and figure out if this is viable. If your body or heart are going to shake, then give it a miss.
To avoid the majority of problems, new investors taking their first steps towards learning the basics of stock trading should have access to multiple sources of quality education.
So that’s why they usually open a free demo account (You can too, with our partners!).
Trial and error coupled with the ability to keep pressing forth will eventually lead to success.
The great advantage of stock trading lies in the fact that the game itself lasts a lifetime so investors have years to develop and hone their skills.
Strategies used years ago are still useful today.
This game is always in full force.
CHAPTER 2 – THE VERY FIRST STEP
Open a stock broker account.
Find a good online stock broker and open an account. Become familiarized with the layout and to take advantage of the free trading tools and research offered to clients only. Many brokers offer virtual trading, demo account, which is beneficial because you can trade with virtual money and have practice and learn.
Investors should know the best online brokers to trade with. Some online stock brokers are known for their award-winning customer service while others are known for inexpensive stock trades or powerful trading tools.
Since 2000, the stock markets have become electronic which provide trading conducted online. All you need are demat (See below) and trading account to invest in the stock market. A trading account is opened with a stockbroker.
What is the demat account?
A Demat Account is an account that allows investors to hold their shares in an electronic form. Stocks in Demat account remain in dematerialized form. Dematerialization is the process of converting physical shares into electronic format.
A demat account can be opened with no balance of shares.
The benefits of demat:
– An easy and convenient way to hold securities
– Immediate transfer of securities
– No stamp duty on transfer of securities
– Safer than paper-shares (earlier risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. are mostly eliminated)
– Reduced paperwork for transfer of securities
– Reduced transaction cost
– No “odd lot” problem: even one share can be sold
– Change in address recorded with a Depository Participant (DP) gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them separately.
– Transmission of securities is done by DP, eliminating the need for notifying companies.
– Automatic credit into demat account for shares arising out of bonus/split, consolidation/merger, etc.
– A single demat account can hold investments in both equity and debt instruments.
– Traders can work from anywhere (e.g. even from home).
HOW TO OPEN DEMAT ACCOUNT
– You have to approach a depository participant (DP), an agent of the depository, and fill up an account opening form. Along with the account opening form, you must enclose photocopies of some documents for proof of identity and proof of address.
– You will have to sign an agreement with DP in the depository prescribed standard format, which gives details of the rights and duties of investor and DP.
– You are entitled to receive a copy of the agreement and schedule of charges for future reference.
– The DP will then open an account and give you the demat account number. This is also called a beneficial owner identification number (BOID).
– All your purchases/investments in securities will be credited to this account.
– If you sell your securities, your demat account will be debited.
HOW TO OPEN A TRADING ACCOUNT
– Select the stockbroker or company (we strongly recommend working with our partners, that is a guarantee that you’ll get the best services). Ensure that the broker is good and will take your orders in a timely manner. Time is the most important in the stock market. Even a few minutes can change the market price of the stock. Ensure that you select a good broker.
– Compare brokerage rates. Every broker charges you a certain fee for processing your orders. But, some may charge more, some less. Some give discounts on the basis of the number of trades conducted. Take all this into account before opening an account. It is not necessary to choose a broker who charges the lowest fees. Good quality brokerage services provided often may need higher than average charges
– Next step, get in touch with the brokerage company or broker and inquire knowledge about the account opening procedure. Very often, the firm would send a representative to your house with the account opening form and the Know Your Client (KYC) form. Fill these two forms up. Submit along with two documents to prove your identity and address.
– Your application will be verified either through an in-person check or on the phone. You will be asked to reveal your personal details.
After processing, you will get your trading accounts details and, you are ready to conduct trades in the stock market.
It’s like the procedure for opening a demat account. You need to submit proofs of identity and address along with a passport size photograph and the account opening form for opening a trading account.
PROOF OF IDENTITY: PAN card, voter’s ID, passport, driver’s license, bank attestation, IT returns, electricity bill, telephone bill, ID cards with applicant’s photo issued by the central or state government and its departments, statutory or regulatory authorities, public sector undertakings (PSUs), scheduled commercial banks, public financial institutions, colleges affiliated to universities.
PROOF OF ADDRESS: Ration card, passport, voter ID card, driving license, bank passbook or bank statement, verified copies of electricity bills, residence telephone bills, leave and license agreement or agreement for sale, self-declaration by High Court or Supreme Court judges, identity card or a document with address issued by the central or state government and its departments, statutory or regulatory authorities, public sector undertakings (PSUs), scheduled commercial banks, public financial institutions.
And now you are ready to start your first trade. Wait! There are more. See the next chapter.
CHAPTER 3 – How to learn about trading
First of all, don’t worry, you are not alone. There are a lot of people who are trying to make money online. You can find a very good way to make money online and for free. I am not a fan of pay-to-be-rich-quick scams online.
For new investors wanting to take their first steps, I offer great answers to the simple question:
“How do I get started? How can I learn about trading?”
Your first step toward learning the basics of trading should have multiple sources of a good education. Trials and errors combined with the ability to continue will finally lead to success.
Read books, read articles, find a mentor or advisor, study the greats, read and follow the market, consider paid subscriptions and be careful.
For some starting level investor, the stock market can be a lot difficult to understand. Without a good knowledge, no one is capable to dive into it.
There are two main methods of how to choose stocks.
The first called fundamental analysis and second called technical analysis (More about them- Chapter 6).
The first refers to the use of a company’s financial reports and public statements to analyze the strength of the business. Balance sheets, income statements, yearly and quarterly earnings, and news releases are all important tools for fundamental analysis. You can find those reports online, as are tutorials on how to read them.
The second refers that swings in stock prices follow sample that traders can learn to detect and profit from. Technical analysis is not as widely accepted or practiced as fundamental analysis. Many traders use a combination of the two techniques to choose stocks.
Choosing a company with healthy fundamentals and then from time to time trading on a technical indicator is a safer strategy than relying only on technical indicators.
Before you decide to buy or sell any stock, you should completely research the company, its leadership, and its competition. Various sites offer excellent compilations of news stories, financial statements, and stock price charts. Stock sites also show professional analysts’ ratings of a given stock, with indicate whether that analyst advises a trader to buy, hold or sell a stock.
Before you begin buying and selling stocks, you have to decide which online trading service you want to use. Choosing your brokerage partner carefully can directly affect your bottom line.
The best advice I got as an online trader is to choose my brokerage partner with open eyes.
What you have to do:
Practice with an online stock simulator: Using these allows you to practice your skills with zero risks. Many come with tutorials and forums to discuss investing strategies. However, keep in mind that simulators don’t reflect the real emotions of trading and consequently are best used to test theoretical trading systems
Trade penny stocks: You can find companies that offer stocks that are traded for a very low cost. This wonderful opportunity to practice leveraging the market without a lot of risks. Penny stocks are usually traded outside the major stock exchanges. They are usually traded on the over-the-counter-bulletin-board (OTCBB) or through daily publications called pink sheets.
Educate yourself about financial performance indicators: Read the news and financial websites. Listen to podcasts or watch online investment courses. Join a local investment club to learn from more experienced investors. Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web.
CHAPTER 4 – The Barriers to Learning About Stocks
When you step to the world of investments, you can find that it is pictured with many paradoxes.
One of these is the fact that, although there is a lot of literature out there, like books, websites, videos, podcasts, magazines, television programs, investing still exist like a cunning business, filled with dangers and risks of various type. It is not easy to earn a systematically good return at a reasonable level of risk without something going wrong at various times.
This raises a basic question — what and how much can you really learn about the stock market?
At any point in time, there are some people who claim that the markets will go up and others who claim that it will drop, while others rather like to say it will move sideways.
And you can use the same source of information to draft similar contradictory conclusions.
What does this mean? This means that you have to be very careful about “knowledge” of any kind about the stock market, or other investment markets.
I have no doubt that it is hard to learn anything reliable and consistent about the daily (or short-term) ups and downs of the markets. You can really consciously learn about something that is stable enough, like a foreign language, the principles of mathematics or economics. This can be used only to a limited extent for the stock market.
Stocks theoretical are not much different than they were decades or centuries ago.
There are trusty structured principles of asset allocation and arbitrage, short selling, and many other basics, intermediate and advanced concepts and methods.
The problem is that there is a terrible amount that is not stable. Especially, the identical starting position for investments can, at different points in time, lead to completely different factors and results. With each situation, different characteristics dominate, and what worked or failed before, may do the opposite in some other time.
This means that experience is crucial, and skill and plain luck too.
Learning the “theory” is necessary as a starting point, but from there you need to develop a feel for real situations and learn to recognize the model of activity and behavior, as well as how they interface, with one another.
But in the investment scene, experience and expertise like this are not always reliable.
That explains why even the best pros fail from time to time. You can find examples of failure among people who are really well-educated and informed, but they were simply in the wrong market at the wrong time.
Knowledge is absolute, but the experience is relative to other people and to a particular situation. We can not know where our knowledge begins and ends or what we do not know, which is more important.
The economy has always been characterized by unresolved issues and opposing views.
For example, neo-classicists are keen on markets and leaving them alone.
Keynesians, as direct contrast, like to get involved in markets.
There is no clear right and wrong on this field. There is no approach to economic and financial issues that works perfectly at all times. That’s why economists are always manipulating trying to get things right, and often making it wrong. This means you can surely learn about the controversy, but not the one right way, which just does not exist.
The other thing, you can be sure that something that is truly illogical can be excluded. Yes, people take stupid risks sometimes. But illogical is something else.
For instance, if someone asks for a low-risk investment, they will not deliberately agree to a high-risk one. That is illogical for them and it won’t happen. In the same sense, people make mistakes, but they don’t on purpose do things that cannot realistically pay off and that is blasted from the beginning.
There are a lot of things that are never a good idea. Investment portfolios should always be properly diversified, rebalanced regularly, not excessively cost-heavy and so on. There are many pros and cons that can save you from disaster.
So you must know your personal limitations.
And you have to count on people who are unethical and dishonest. The problem is that new technology and ideas invariably lead to new rackets, scams, and miss-selling. You have to know the limitations of theoretical knowledge in investing.
We can figure out what to keep away and what should work. But there is nothing and no one out there who can tell us what will work.
CHAPTER 5 – How To Remove The Barriers
First of all, never base your decisions on emotions, rumors or rush to the next hot opportunity.
You will end up losing money as a result. Some investors despite their problems, continue with the same actions and keep getting the same bad results. Removing the barriers to success is crucial to changing investors’ behavior and enabling them to become successful. All investors must seek for continuously removing new barriers as they appear.
What kind of barriers to success you may have?
The fear and greed! Many investors experienced the obscure of ability to rationally consider through an investing opportunity. This results in poor investment decisions and usually a loss of money.
For instance, it is in an investor’s best interest to sell high and buy low, investors hate to sell winners and are unwilling to buy out-of-favor stocks. And many investors hold on to winning investments too long. When they fall back, they continue to hold on to them, hoping they will return to their previous highs. They even lie to themselves that they will sell if the price returns to the level at which they bought it.
Then there are the investors who hold on to losing investments for too long. They have some hope that if they wait until their shares recover, they can sell to at least break even, very often such investors become losers. Because their capital is tied up in a losing investment and is unable to produce a return. This reduces account balances and expands stress levels. Most investors admit that holding investments too long is the mistake that was most detrimental to their success.
Some investors think if you just buy and sell the right stock, you will always make money. That’s wrong! Totally mistake! Sometimes, investors can have less understanding of how markets work. That drives stock prices and successful investing performance. Further, many investors tend to overestimate their ability to beat the market. As a result, they take on unnecessary risks. People are often drawn to powerful performance, even when it’s not sustainable. Many investors follow the hottest sector and don’t have sufficient understanding of the risks involved.
For instance, investors realize they should not overweight their portfolios with too much money in one investment, but they continue to do so. It isn’t rare that people buy too much stock in the company where they are employed, because the company’s available retirement funds and use of options as a part of their compensation package makes this easy. This may leave investors with a portfolio that lacks diversification.
Some other investors don’t understand how bonds work, and they avoid them. Few of them realize that bonds hold a preferred position should a company declare bankruptcy. Many others don’t realize that when interest rates rise, bond prices go down. When it comes to understanding important concepts such as how a central bank sets interest rates and the yield curve, even fewer investors have sufficient knowledge to make rational decisions.
And more interesting, most investors do not know when to sell a stock that has substantially appreciated. They continue to hold the stock instead of selling part of their position. On that way, they could capture some of the profit and make capital convenient and available for other investments. They can’t realize that as the price of the stock goes up their portfolio becomes even more unbalanced.
The market has the ability to balance portfolios for investors, sometimes to their astonishment. Many investors are confused by the idea that rebalancing entails selling some of the investments that have performed best and buying more quality stocks that have lagged.
Losing the Bigger Picture
Despite many investors like to say they invest with a long-term perspective, they continue to make decisions based on short-term movements and ideas. Most investors believe that setting long-term goals for such things as buying a home or providing for retirement are important. But still, they fail to establish viable financial plans to do so.
Without these plans, their decisions are decaying. Basing decisions on unpredictable market fluctuations can be very dangerous because there is a good chance that these investors will make the wrong decision. That can obstruct their ability to achieve their long-term goals. When the investors realize that the market has risen, they pour cash into stocks and mutual funds, trying to grab part of the profit the professionals have realized. When the market puts in a decline, some investors panic and sell close the bottom. And very often, this pattern continues, causing such investors to lose much of their capital.
How to remove barriers
No matter what your barriers are, it is important to put together a plan to remove them. Here are some steps you can take to eliminate these barriers to your investing success. Experts advise doing this.
* Learn to monitor your performance:
Measuring your performance creates a record of what has worked and what has not. This can help you to recognize problems that you repeat. You should, at a minimum, document the overall market trend, the sector trend, the rationale for making the trade, the exit target and the trailing stop. Do this for each buy (or short) as well as sell (or cover). This record is very useful in evaluating your investing activities and can be used to identify what barriers you are meeting that obstruct your success.
* After you have measured your actions
You can identify what you have to change: Inspect your past tradings and find patterns that show to barriers to success. Maybe you impulsively buy the next stock without thinking? Does your explanation prove to be wrong most of the time? The key is to identify the investing behavior that inhibits your performance.
* Stay focused on what you need to change.
Like any effort to change behavior, you must remain focused on the actions you take to reinforce the investing behavior you wish to have. If you think you are not focused on how to change your behavior, then take a break from your investing until you recover your focus.
* Determine how you will understand your losses.
Keep in your mind that losses are part of investing. Learning how to deal with them is one of the most important pieces of successful investing behavior. You have to define what your loss looks like through your stop loss and reasons for the trade. You must accept the loss as part of the trading. Accepting a loss is a trading skill that is a crucial behavior. By making the execution of a losing trade an automatic process in your trading strategy, you remove the emotion that comes from a loss. This opens you up to the next opportunity without fear.
* Become an expert at one investing strategy:
There are many ways to evaluate the market and select stocks which offer good investment opportunities. Don’t try to understand every perspective on a stock. It is best to get to know one reliable investing strategy. In that way, you will gain confidence in your investing access. This knowledge will form a valid base for your investing. And when you become an expert you can expand your knowledge base by adding a new approach.
* Think in probabilities:
The market is in permanent movement. It forces the investor to continually evaluate the risk-reward ratio of each opportunity. You can’t move the market, that’s why you need to rate what is the greatest possibility that will move the market, key sectors and the stocks you are watching. Evaluating what is most possible to happen in the sense of probabilities could help you to make a valid investing estimation.
* Learn how to be objective:
Many investors want to believe that the market will do what they think it should do, rather than what it actually does. Any limits you place on the market will usually turn out to be wrong. The market does what the market does. Investors are best served if they maintain an objective perspective. If you are objective, then you will not feel pressured to act quickly. You will not be afraid to make an investment decision. And the most important, you will not force your opinion on the market, but rather sense what the market is trying to tell you.
Do not expect this to happen overnight. Removing the barrier is a long-term process. But if you have a defined plan, you will be able to create a program to remove the barriers that keep you from achieving success as an investor.
CHAPTER 6 – How to research and choose stock?
Investors have a name for all types of research, one of them is fundamental analysis.
involves looking at numbers and other measures in a company’s financials as well as assessing the less tangible aspects of a business. This approach can help you decide whether a stock deserves a spot in your portfolio. Pick a company you’re interested in. Read current and past annual reports and letters to shareholders. Gather the numbers and financial ratios and put them all into context by comparing the company’s performance history to the industry and its peers. Then work through the list of qualitative questions.
So, what you have to do after fundamental analysis, step by step:
Perform a technical analysis
– Technical analysis is a way to understand market psychology or what are investors feelings about a company, which are manifested in the stock prices. Technical analysts are mostly short-term holders, concerned about the timing of their buys and sells. If you can detect a pattern, you might be able to predict when stock prices will fall and drop. This can inform you about when to buy or sell certain stocks.
The technical analysis makes use of moving averages to track security prices. Moving averages measure the average price of the security over a set of period of time. This helps traders to easily identify trends.
Patterns include known price boundaries in the market price of a stock. The high boundary is known as the “resistance.” The low boundary is called “support.”
Recognizing these levels provide a trader to know when to buy (at resistance) and when to sell (at support). And there are some specific patterns are also noticeable in stock charts. The most usual is “head and shoulders.” This is a peak price then drop, followed by a taller peak then drop, and finally followed by a peak similar in height to the first. This pattern signals that an upward price trend will end. There are also inverse head and shoulders patterns, which mark the end to a downward price trend.
Register the difference between a trader and an investor:
An investor search for a company with a competitive advantage in the marketplace that will provide sales and earnings growth over a long period. A trader seeks to find companies with an identifiable price trend that can be exploited in the short-term. Traders typically use technical analysis to identify price trends. Investors typically use fundamental analysis, because they are focused on the long term.
Learn about different orders traders make:
Orders are what traders use to describe the trades that they want their brokers to make for them. There are a lot of different types of orders.
The simplest type of order is a market order, which buys or sells a set number of shares of a security at the prevalent market price. A limit order buys or sells the security when its price reaches a decision point.
For instance, placing a buy limit order on security will order the broker to only purchase the security if the price fell to a some defined level. This allows a trader to specify the maximum amount willing to pay, a limit order guarantees the price the trader will pay or be paid, but not that the trade will happen. Stop order tell the broker to buy or sell a security if the price rises above or falls below a certain point. But, the price that the stop order will be filled at is not guaranteed because it is the current market price.
Also, there is a combination of stop and limit orders called a stop-limit order. When the price of the security passes a certain level, this order specifies that the order becomes a limit order rather than a market order as it does in a regular stop order.
- Understand short selling: Short selling is when a trader sells shares of a security that they do not yet own or have borrowed. Short selling is typically done with the aspiration that the market price of the security will fall, which would result in the trader having the ability to buy the security shares for a lower price than they sold them for in the short sale. Short selling can be used to make a profit or hedge against risk. But it is very risky. Short selling should only be done by experienced traders who understand the market thoroughly.
CHAPTER 7 – How to pick a broker
Choosing an online broker seems like a simple process. But in reality, it can be a nightmare because finding the right broker is not easy. Not at all!!!
On the very beginning, you want to be sure that the broker has the right credentials, understands the market, has similar wealth-building beliefs as you do. Trust me. You can also find our list of highly respected brokerages on our wall of fame.
The main point in choosing a broker is
- a) make sure a broker offers the services and features you most need,
- b) don’t pay extra for services and features you don’t need or want.
The best approach is to make a list of facilities you want from your broker. There are some tips and tricks you have to take attention:
- Minimum Trades – Check if there is a clause about minimum trades that you will have to do as well as the penalty for not complying with the requirement. There are actually brokers who have no minimum requirement or require only a few hundred dollars.
- Costs – Consider the commissions and other fees that broking companies charge. Brokers typically have a wide assortment of fees for cost per trade. That’s the holy grail of the online brokerage universe.
- Customer service – Look for customer reviews online or on specialized forums, please. Make sure that the broker offers such support and it’s available during more than just “regular business hours”. Check if it’s available in various forms: email support and live chat can be more convenient contact methods than the direct phone.
- Investment options – Some ‘’full service’’ brokers may not offer products of all asset management companies or AMCs. A good broker is one that offers you the ability to invest in a large number of assets: stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate investment trusts.
You will need a broker who can provide you with all of the possibilities if you want to spread your investment wings.
- Investment Advice – The problem may arise if you are not DIY (do it yourself) type. Some brokers will offer limited investment advice, while others will provide a full investment advisory service, usually for a small fee, some will charge a higher fee if you need broker assistance. You have to explore what suits you best.
- Asset Allocation Guidance – Especially for new investors Asset allocation is one of the more challenging investment functions. It can be complicated enough to decide on initial asset allocation, but even more, involved to maintain that allocation going forward. Periodic rebalancing is not the easiest of tasks if it must be done manually and will be necessary to do from time to time.
Most robo advisor services will handle asset allocation and automatic rebalancing as part of their account management fee. If you’re looking for “hands-off” investing, robo advisors could be the best option for you.
You have to find out if the broker offers this service and if there is an additional charge.
- Types of Retirement Accounts – It’s best to confirm this at the very beginning that the broker offers multiple types of retirement accounts to invest in. And even if you want only a regular investment account right now, you may decide to open a custodial account for one of your children in the future. If you have confirmation that options are existing before you first sign on, you can be relaxed. I know that most investors like to have all of their various accounts with a single broker, particularly if they are happy with the service.
The most important question is about what type of trader you want to be.
Are you an active trader or buy-and-hold investor? Whatever you are, it will affect your choice of broker. If you are a buy-and-hold investor and invest in index funds, making a few trades per year, fund selection may be more important to you than low transaction fees.
You have to determine if you’re an investor which means long term investing, or an active trader, short term trading.
If you are still learning how to trade stocks online, you shouldn’t rush into choosing a broker.
Everyone eventually develops their own trading style.
Online stock brokers offer a wide array of features and fees. Choosing a broker with a good reputation is worth. Someone with the features you really need and a reasonable fee structure.
Don’t let yourself being attracted by a platform with the bells and whistles. Especially when you are in the beginning.
CHAPTER 8 – How to Start Trading
Investing in the stock market is easy if you know how to start.
Never start investing or trading on your own. Ask to be advised by some expert. It is always best to access a financial advisor who will tell you how you should invest or trade, established on your financial situation and risk appetite.
Talk to others who invest. Read books, journals, and newspapers for recommendations. You can talk to your stockbroker for advice but don’t listen to everything he says. Always take a second opinion as brokers might have vested interests. In the beginning, it is best to go for known brands and big companies that have a good business status. Without knowledge, you may feel lost.
Let’s make clear the basic because you’ve decided to join the crazy world of trading stocks and shares.
You have to know that shareholders usually have a right to vote at company conferences. But, if you possess just one of the three billion Facebook shares don’t expect Mark Zuckerberg to listen to your opinion!
Another thing you need to know is that a company’s shares are indivisible. You cannot buy fewer than one. Shares were pieces of paper that shareholders kept in a safe but since the ‘90s, this all changed to virtual shares.
Before you start trading stocks, you have to buy them!
You can do this in many different but easy ways.
Some companies allow you to buy its shares directly from them but If you can’t purchase the shares directly or you’re not sure which company to invest in, ask your bank. Some banks offer an online trading service connected to your existing accounts.
Ask your bank to see if this option is available.
If your bank doesn’t offer a trading service, you can buy shares through a brokerage company.
Brokers buy and sell securities in exchange for a commission. You can set up a simple brokerage account online or hire a so-called ‘full-service broker’ who will trade stocks on your behalf. They can be a consultant or advisor for you. This will cost a little more but it is worth because you know nothing about shares or stocks or trading or investing.
So, you want to start investing in stocks or CFDs, but you must always remember three things:
- Never invest more money than you can afford to lose. With shares and CFDs, there is a risk of losing all the money you have invested.
- Follow your head, not your heart. Your heart will always pull you towards certain stocks. Stop and think. Only invest in companies that seem able to grow their profits, despite your emotions.
- Never invest your savings in just one company. ‘Never put all your eggs in one basket,’ as the saying goes. Place your investments across many different companies.
This way, you’ll significantly decrease the risk of loss, and increase the chance to multiply your investment.
With your online broker account setup, the best way to get started it to simply take the plunge and make your first trade. Start with small, 1, 10, or 20 shares will serve its purpose and bring you in the game.
If trading with real capital is not possible initially, consider using a stock simulator for virtual trading. Numbers of different online brokers offer virtual trading for practicing and learning.
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It’s too easy to lose money in a stock exchange, so start with a virtual where money is virtual, but the stocks, stock prices, are real. So, you can buy stocks using your virtual money, see how they are performing, see if you are able to sell them at the right time etc.
Before you start putting your real money, you would learn the tricks of the trade with virtual money.
Take it slow.
Fast money and easy earnings are mostly what young people want to succeed in the business world. They are attracted by 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.
* 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 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 to yourself than other people’s estimation.
* Stock exchange is NOT a money-making machine – Most of those who want to participate stock market, have 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. 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 to be wiser in making decisions in the future.
That’s how it works!
CHAPTER 9 – Five Tips For Beginners In Cryptocurrencies Investment
If you are reading our post Trading with success, you are one of those who has been tracking what’s happening on the crypto’s market for years, but you don’t have the courage to start investing.
Therefore we want to tell you several things about trading cryptos.
Many people believe that the cryptocurrency is the most popular investment option currently available. There are many stories about how people become millionaires through their bit of investment.
Bitcoin and Ethereum are definitely by far the hottest investment product currently available among cryptocurrencies. Their advocates see a future in which Bitcoin or other cryptocurrencies will substitute Euro, Dollar, GBP and so on and create the first free and hard world currency.
But slowly, we’ll soon get to that place. The first things come first.
What should you know at the beginning, before any move?
First of all, READ THE WHITEPAPER AND EVALUATE THE USE CASES.
It is best to thoroughly understand their concept and try to ask as many questions as you can.
You can join their various social media channels to interact with other people or the concerned teams and make more clear your findings.
Educate yourself further and frame a self-made case study including all positive and negative aspects.
SECOND, thoroughly investigate the chosen trader website to find out about the team members. You have to do so in order to find out whether or not the members or founders have a questionable history. Finally, after you evaluate some of them and find out about the founders or suspicious about their business or working history, you can decide not to participate.
THIRD, keep your eyes on what is their announcement on various forums.
Try to get into the feelings and attitudes of people on forums.
You have to be very careful here because a good number of ICO teams have their own bots, but competition also does not regret money to downplay them.
Do they give the answers? Are they interested? Are they avoid your questions? Have they banned you from asking questions?
Well, it’s good if they banish you, then you know you’re dealing with fraudsters.
FOURTH, you should find an expert who has some knowledge!
You should follow such people who can enable you to have reasonable judgment.
Follow expert people in the same field.
FIFTH, you should understand the coin distribution matrix and total supply and understand the project’s token economics.
It’s highly recommended that you should not invest until you are sure. Also, you should not invest more than what you are ready to lose. That’s the rule.
Let’s get back to shares and stocks.
CHAPTER 10 – How To Read A Stock Charts
Amateur traders act upon impulses and this is a problem because all is not as it seems in the market.
But first comes first.
When you enter the stock market, which means that you have done everything from previous chapters and you bought your first stock, you will find that you have to follow the movement on the stock market through stock charts.
Chart-reading is the single most important investing skill you’ll ever learn.
First of all, you have to register that fund managers and big investors account for 80% of all trading activity in the market. Their buying and selling will either push your stock up or down. But you are an individual investor and your primary intent is to buy stocks big investors are buying ponderously and of course, you want to stay away from stocks they’re aggressively selling. That’s where charts enter. Once you know what to look for, you’ll see that charts literally show you what these big investors are doing. You’ll be able to fast realize when a stock is being ponderously bought or sold. You’ll be able to use that information to identify the best time to buy, sell or hold your stock positions.
There are many different types of stock charts: line, bar, OHLC (open-high-low-close), candlestick, mountain, point-and-figure, and others, which are viewable in different time frames: most commonly, daily, weekly, monthly, and intraday charts.
Different types of stock charts
Each style and time frame has its advantages and disadvantages, but they all provide you information that you can use to make investing decisions.
Also, there are many different types of stock charts that display various types of information. But all stock charts display price and volume. On each stock chart, you can find the price history. The amount of trading history each bar represents is based on the period of a chart. For instance, on a daily stock chart, each price bar represents the prices the stock traded during that day. On a weekly stock chart, each price bar represents the prices the stock traded during that week.
The length of each vertical bar illustrates a stock’s high-low price range.
The top of the bar match to the highest price paid for the stock during some period and the bottom of the bar corresponds to the lowest price paid. The small intersecting horizontal slash shows the current price or where a stock closed at the end of some period. The price bar will be presented in blue if the price of the most recent trade is equal to or greater than the previous period’s last price, or magenta if it is less than the previous period’s price close.
The vertical lines shown at the bottom of the chart correspond the number of shares traded during some time period of the chart. The length of the volume bar indicates a value that corresponds to the scale at its right. The color of a volume bar is determined by its corresponding price bar; blue if the most recent trade is equal to or greater than the previous period’s last trade, and magenta if it is less than the previous period’s closing price.
Well, you are beginners so it is important to show you step by step how to read charts.
You can use different websites but I think that Google Finance has a smooth user interface.
Now let’s take a look at a typical stock chart.
We’ll use Dow Jones Industrial for this article Trading With Success – a guide for beginners.
You can see, the series of letters after the name of the company is the ticker symbol. It identifies the company on the stock exchange.
We’ll search AAPL, which is Apple’s ticker symbol. This is what we get:
Then, click the button to expand the chart to full screen:
Now let’s jump into the different pieces and parts of the stock chart so you can begin to read like a pro.
At first, you have to identify the trend line.
This is that blue line you see every time you hear about a stock! It’s either going up or down right? The trend line seems like common sense, but there are a few things I want to show so you can understand it in a little more detail.
You know that stocks will take huge dives and also make huge climbs. If you’ve read previous chapters you’ll know that you have to hold your emotions in control to be a successful investor.
Never react to large drops or huge gains in a positive or negative way.
You are using this piece of the stock chart only to see what’s going on.
The trend line should lead you to dig further. For instance, Apple as a company really took off from 2009 to 2012. But in period 2012/2013 the stock began to go down more than 40%! This is where your trend line is useful. Something is happening and you have to pay attention to. You have to find out what’s going on with this company. Most strong companies can recover from hits like this, but you have to be careful.
We have to recall some history here.
Right around this time, Apple experienced a few major changes. First, it’s longtime CEO, Steve Jobs, resigned (2011). Also, around 2012, Apple informed that their profit margins were significantly decreasing, despite growing smartphone market. They were trying to expand the smartphone into developing countries, but they were too expensive to enter there.
And the stock price was falling.
But new CEO Tim Cook made strategic moves with the company and the rest of the trend line shows that.
The lesson here is how to use your trend line as a first peek, an indicator of something worth to look into.
The next thing you have to look at are the lines of resistance and support.
These are levels at which the stock stays within, over a certain period of time. A level of support is a price that a stock is unlikely to drop below, while a level of resistance is one that it’s unlikely to go above. It will stay the same until some major change occurs, such as a reduced profit margin.
A stock’s price does the same thing within these lines of support and resistance.
The point here is to know when to buy and when to sell.
Take a look at Apple’s stock chart again:
I want to show you how the process is important. You have to know that everyone will draw lines of resistance and support differently, depending on how long they plan to hold the stock. If you’re a short-term investor, you may draw more to analyze trends during a shorter period.
So, what we can see in this image?
Line A represents the very first line of support shown. Based on trends earlier to this, Everyone feels comfy that the stock price won’t go below this point and probably consider buying at this price or higher.
Line B is the first line of resistance. It is obvious that the stock has peaked at that point for now and it is expected to go higher. Maybe it’s time to consider selling at this price or slightly lower.
Line C shows, the stock has bottomed out again, thus creating a new line of support.
Line D shows the stock price has increased significantly and it’s comfortable to establish this as a new line of resistance.
The trend continues with Lines E, F, G, and H, bringing new lines of support and resistance as time goes on.
If it seems complicated, don’t worry. because it is. And a lot of this is speculations.
Knowing the lines of resistance can help you decide when to buy or sell a stock.
But remember, it’s subjective and it won’t give you a clear opinion about what to do. You have to use some of your own analysis and evaluation.
On the next chart, you can see if and when the company issued a dividend, as well as if there was ever a stock split:
A dividend is when the board of directors decides to give a portion of its earnings back to its shareholders. If you own their stock, you get a small piece of the profit.
Some companies issue dividends, some don’t. If the company doesn’t issue a dividend doesn’t mean it’s not worth investing in.
Some companies just prefer to focus on growth, so they’ll reinvest their earnings as opposed to giving it back to the shareholders. Apple, in this case, could pay dividends quarterly without influence on growth.
Also, you can see that there was a stock split in 2014. That is a strategic move made by the company’s board of directors to issue more shares of stock to the public.
In this case, Apple did a seven to one stock split, noted as 7:1, which means that for every share of AAPL shareholders owned prior to the split, they now have seven.
The value of the company doesn’t change, but the share price might.
Companies will often do this to attract smaller investors when the share price decreases.
Many times when a stock split happens, more people invest because the share price is often lower. That increases demand and the overall share price.
On the bottom of the chart, you can see many small, vertical lines. This is a trend of the volumes at which the stock is traded. Volumes shouldn’t be the only determining factor when buying a stock. Usually, trading volumes increase when the company is in public focus, in a positive or negative sense.
When volumes are increasing, it can also shift the price of the stock quickly. Take a look.
Line A, shows a high volume of trading activity that corresponded with a drop in the stock price. Maybe some bad news that day caused people to panic.
Line B, you can see a slight uptick in trading volume that corresponds with an upward trend in the stock price.
You shouldn’t necessarily have to assume it there will be a connection between stock price and trading volume. But it’s good to know what the volumes have been in the past and what they are currently.
If the volumes are high, a lot of people are trading the stock that day and it is a good idea to buy or sell it quickly.
This is the basics of how to read a stock chart. Once you’ve mastered most of these techniques, you should be able to analyze a stock’s historical activity with high success
CHAPTER 11 – How To Know Which Asset To Invest
The main asset classes are:
- a) Shares/stocks (also known as equities).
- b) Bonds (also known as fixed-interest stocks or debt).
- c) Property.
- d) Commodities.
- e) Cash and cash equivalents.
What are the best assets to invest in?
(the return criteria is based off trying to generate $10,000 a year in passive income)
1) Certificates of Deposit (CDs).
2) Fixed Income / Bonds.
3) Physical Real Estate.
4) Peer-to-Peer Lending (P2P)
5) Dividend Investing.
6) Private Equity Investing.
7) Creating Your Own Products.
8) Real Estate Crowdsourcing.
And you have to decide which asset to invest. Among those?
Let’s say like this, investing is about laying out money today expecting to get more money back in the future. This is best achieved by acquiring productive assets. Productive assets are investments that internally throw off surplus money from some sort of activity. To be clear, if you buy a painting, it isn’t a productive asset. After 200 years you’ll still own the painting, which may or may not be worth more or less money. But, if you buy an apartment building you’ll not only have the building but all of the cash it produced from rent over that century.
So, how to pick the asset suitable for you?
First of all, never invest all your money into one asset. You should mix them. The right asset mix should help balance risk with your expected rate of return on your investments, fit your tolerance for risk, let you get your money when you need it, help provide the growth you need to reach your goals, and change as your needs and goals change over time.
But first it is smart to know each of the assets classes individually and below you will find the answers.
Shares (also known as equities)
Shares are bought through a stockbroker. The cheapest and fastest way to buy and sell shares is through an online, ‘execution-only’ broker. Execution-only means the broker will take your order and implement it without giving you any advice. Many execution-only brokers provide lots of information and research about shares but this does not include advice. Anybody wishing to use an execution-only service must take full responsibility for their investment. If you do need advice you have to find a stockbroker offering either an advisory or discretionary service. With a discretionary service, you authorize the broker to buy and sell shares on your behalf, within pre-arranged limits. An advisory client has to give his or her permission before a broker can conduct a trade.
Bonds (also known as fixed-interest stocks).
These represent a form of IOU issued by governments and companies when they want to borrow money from investors. They pay a fixed level of interest, with higher-risk borrowers paying more in interest than lower-risk borrowers.
The property has a good record in providing a financial return that beats inflation, whether residential or commercial it is. Funds can either buy into physical ‘bricks and mortar’ or buy shares in property development or real estate investment companies. Funds generally focus on commercial property, but some buy into residential property as well.
You can find a huge variety of commodities traded on global markets: oil and gas; precious metals such as gold and silver; industrial metals such as copper and iron; and ‘soft’ agricultural commodities such as wheat, rice, and soya. Just like shares and bonds, commodity prices rise and fall in response to supply and demand, and funds can take advantage of this.
It may be a bit strange that cash is considered to be an asset class because the whole reason for investing in the first place is to grow your money faster than if it was left in the bank. But you must have in your mind that cash provides a useful benchmark for all investments. Finally, investments that don’t beat cash have failed. Cash also provides a safe shelter for funds when markets are bumpy or overvalued. Some funds also trade in currencies to boost their returns from cash when interest rates are low.
Being an expert asset picker isn’t actually necessary to grow your wealth.
The majority get in trouble especially when they think of investing as a way to get rich quickly.
“People will overpay for the prayer and dream of getting richer. So if you stay away from glamour stocks, you’re going to avoid being the wrong side of those transactions,” said Bruce Greenwald, a professor of finance and asset management at the Columbia Business School.
Your path to success as an investor or trader is not likely to hinge on whatever hot stock your friend thinks you should buy ASAP. Your path depends more on how smart a portfolio you put together, as well as how you progressively modify or rebalance it over time.
Well, how do you invest intelligently, if slowly? You have to respect some basic principles.
First of all, why do you want to start investing?
The main argument for putting your money in anything is to avoid losing your wealth during inflation. In your checking account, cash will still be there in 40 years, if you don’t touch any of it. But you won’t be able to buy anything.
Other crucial reasons might include growing a substantial enough saving for retirement and earn enough cash for buying a home. For those kinds of goals you might want assets with higher returns and therefore you’ll have to take on higher risk.
The riskier assets might include stocks and bonds as well as mutual funds, or balanced funds that mix equities and fixed income.
Also, a very important question is when should you begin investing?
You might already know, but you need to be investing for old age. If you start investing in your early ages you will have many advantages as an investor. Just to name a two: you have more time for your money to grow and more time for market downturns to correct themselves.
And how to choose the right asset?
Each type of productive asset has its own characteristics and pros and cons. Here is a quick rundown of some of the potential investments you might make as you start your journey:
If you own equity in a business, you are qualified to a share of the profit or losses caused by the company’s activity. Whether you are acquiring a small business completely or buying shares through the purchase of stock on the stock market. Business equity has historically been the most rewarding asset class for investors. It is wise to observe that a good business is a gift that keeps on giving.
Fixed Income Securities
When you buy fixed income security, you are really lending money to the bond issuer in exchange for interest income. There are billions of ways you can do it, from buying certificates of deposit and money markets to corporate bonds, tax-free municipal bonds etc.
Real Estate – This is maybe the oldest and most easily understood asset class which you as investors may think about. There are several ways to make money investing in real estate but it typically comes with developing the property and selling it for a profit or owning something and letting others use it in exchange for rent.
Intangible Property and Rights
When it is done properly you can create things out of the air that on to print money for you. Adorable! Intangible property includes everything from trademarks and patents to music royalties and copyrights.
Farmland or Other Commodity-Producing Goods
It often involves real estate. Investments in commodity-producing activities are fundamentally different in that you are either producing or extracting something from the ground or nature for what you hope is a profit. For instance, if oil is discovered on your land, you can extract it and earn money from the sales. If you grow wheat, you can sell it and earn cash with every successful weather. But the risks are remarkable: hail, flood, drought can and have caused folks to go bankrupt by investing in this asset class. But also it can make big rewards.
CHAPTER 12 – How to create your first trading strategy
Okay, I understand your dilemma. You would like to be successful and you want to know, what strategy should you choose to nail it.
First, let’s make clear what the Trading Strategy is.
A trading strategy is a set of trading settings that serve the currency trader or stock to determine whether to buy or sell currency or stock, where to enter and exit the position, and how much capital they invest in trade, and in doing so, earn a difference in price. The trading strategy is a fixed plan that is designed to achieve a profitable return by going long or short in markets.
A broker can offer you the opportunity to enter into trades that are multiple times of the value of the margin that you place. The market is fluid and you can open trade or exit from one very quickly, so there is potential to make considerable returns.
And what the Investing Strategy is?
The investment strategy is a set of rules, behaviors or procedures, designed to guide an investor’s selection of an investment portfolio. People have different profit objectives, and their individual skills make different tactics and strategies appropriate.
To complicated? Wait!!! There are more!
Trading strategies can be – automated (various robots for trading, etc.) – manual (the vast majority of traders use their own trading system.)
I would like to show you some of them which are successful. I will give you a brief description of 5 simple strategies that can help you to maximize your profits:
You can enter into a profitable swing trade by timing your trade when there is a breakout after a period of consolidation.
What does this mean? A period of consolidation is said to occur when a currency pair moves in a well-defined price range. A breakout will occur. The values of the currencies will “breakout” through a resistance. If you anticipate the breakout correctly, you can profit from your trade.
A swing trade uses a channel trading strategy. Trades take place between the support and resistance levels of swing highs and swing lows.
Here you will need to identify a currency pair that trades within a certain range. Then, you have to identify the support and resistance levels and then time your trade by taking these movements into account.
It is likely that there will not be a big difference between the upper and lower prices of the range. Because of this reason, you could trade in one of two ways.
The first option is to trade within the range which will limit your profits as the price difference is bound to be minimal.
The second way is to look for a breakout from the range. If this happens, you will have to react quickly. You can make a quick profit, but you can lose out. A “false breakout” may result in the market moving in the opposite direction and lead to losses.
A position trade is not a short-term trade. It is based on macroeconomic trends. It could run over weeks or months or years. Traders take a long-term position based on an understanding of how inflation or the rate at which an economy is growing, will affect the value of a currency. If you want to adopt this strategy, you have to stay stick to two rules. First, do not use much leverage. A maximum of 10:1 is advisable. Secondly, the size should be relatively small. This is because you are taking a stand that there will be a fairly large movement in the relative price of the currency pair.
A carry trade involves entering into a trade in a currency pair that will take advantage of the interest rate differential of the two currencies. That means you will be selling a currency with a low-interest rate and buying one that provides a greater rate of interest.
Normally, you would choose a currency pair where the higher interest rate currency will appreciate to the lower interest rate currency.
Carry trades can be high-risk. They are based on a combination of technical and fundamental analysis.
Fact: “Price frequently lies, but momentum generally speaks the truth.”
At the simplest level, you can use momentum trading when rates are going up, then you should buy and when they are declining, you should sell and maximize your profits in the forex market. If you want to implement this strategy, you have to identify the currency pairs that show the greatest momentum and have moved most strongly. It is possible by tracking price movements over a period of several weeks. Then trade those pairs that show the greatest momentum.
Factors for trading with success
Let’s go back to the beginning and say few words about how for every trader is important to use a reliable and robust trading platform. You will need ‘Expert Advisor’ (EA). It allows you to conduct backtesting of your trading strategy before you commit your funds. You will need one that functions effectively on your smartphone and your tablet as well, a versatile platform that works well under Windows, MacOS, and Linux.
A system with 100% success does not exist so that you must not expect any of these systems to get your earnings each and every time. But, while following all the rules you can only end up in the plus!
How to create your own strategy
Most new traders start by learning the trading strategies of other traders. But, many traders ask, how do I get started with my trading strategy?
Fun fact 1: Creating your first trading strategy is easy.
Fun fact 2: Creating a profitable trading strategy is hard.
Basically, you have to follow some basic steps while formulating your first trading strategy. Building your own can be fun, easy and surprisingly quick.
But, don’t expect your first trading strategy will make you rich.
So, what you have to do?
- Recognize the real reason why you want to enter the market and have principles. – Before you start creating your own trading strategy, you must have an idea of how the market works. Most importantly, you need to answer this question.
Do you think you can make money from it?
To answer this question you have to read about both technical and fundamental analysis. Avoid get-rich-quick offers. Take care of demand and supply. Never have trust in theories that claim that people are perfectly rational.
Your principles will define your every step in the market, so it is very important to stick with it. It will need your full attention.
It is an urge to follow one principle in your first trading strategy.
Never choose complicated solutions. The simpler, the better. Trade by the KISS rule (Keep It Simple Stupid).
In the beginning, you don’t want to be astounded by a complex strategy.
Besides, a trading strategy with more moving parts is harder to manage and improve.
You have to choose a market for your strategy.
What do you want to trade: Forex, Options, Futures, Equities? If you want to trade forex, you have to understand what you are buying and selling with a currency quote. You have to learn about the different models of forex brokers. You have to know how the margin is calculated. If you want to trade equities, you must know what a share means or the difference between a blue-chip and penny stock. There’s a lot to learn about each market but you can not start to learn until you choose your trading market.
The rule of thumb is that you must understand the market you choose to trade in.
What is your trading frame? – Yeah, I know. It’s hard to decide on a trading time frame. At first, you will not know if you like more quick scalping or daily swing trading. Maybe the idea to try intraday trading isn’t bad. There you can watch the market for long-term periods. But you have to know, when you trade fast time frames, you get fast feedback which shortens your learning period. If you are not able to watch the market for long-term periods, start with end-of-day charts.
With some effort, you can learn enough to decide if swing trading is for you.
- You have to define your entry trigger. – It will help you enter the market without hesitation or demur. Both, bar and candlestick patterns are useful triggers. If you prefer indicators, oscillators like the RSI and stochastics are good solutions also.
- You have to plan your exit trigger. – The market can go against you, causing you limitless losses. Having a stop-loss option is crucial. You need to plan when to exit if things go wrong and also you need to plan when to exit if things do go your way. The market will not go in your favor always. That’s why you have to know when is the moment to take profits.
Set your risk limit. – Once you have your entry and exit rules sorted out, you can work on limiting risk. The basic way to do so is by position sizing. Which means that for a certain trading setup, your position size determines how much money you are putting on the line. If you double your position size, and you will double your risk.
You should be very careful about your position size.
- And it’s time to choose a tool to determine the trend. – You don’t trade when you see a Pin Bar (shortener for ‘Pinocchio Bar,’ a single candlestick set up that clues price action traders into potential reversals in the market).
You trade when the market is rising, and you use a bullish Pin Bar to trigger your trade. Because you don’t trade when you see a Gimmee Bar (price action reversal candle formation). Well, you trade when you conclude that the market is going sideways, and you use a Gimmee Bar to enter the market.
You have to decide on a tool to help you judge the market context, trending or not, up or down. Hence, you can choose price action tools like swing pivots and trend lines. Also, you can use technical indicators like moving averages and MACD (Moving Average Convergence Divergence).
- Write down your trading rules. – It is always good advice. Your trading strategy is still simple and you might be able to memorize the trading rules. But you must write down your trading rules. If you write down a trading plan you will get a robust and trustworthy method. Just in order to ensure discipline and consistency. It also gives you a record of your trading strategy. You will find it useful when you have to improve it.
- When you have written rules, you can backtest the strategy. – When you have a discretionary trading strategy, backtesting can be an arduous process. Discretionary trading is decision-based trading where the trader decides which trades to make based on current market conditions, and system trading is rule-based trading where the trading system decides which trades to make, regardless of current conditions. So, if you have a discretionary trading strategy you need to replay the market price action and record your trades manually. But if you have a mechanical trading strategy and a coding background, you can speed up this stage. Looking through the trades one by one is a fantastic way to develop your market instincts. This can also help you think of the ways to improve your trading strategy.
Don’t worry if your first trading strategy is not profitable.
It’s okay. Your trading strategy is not fixed, it is a living thing. As your experience and knowledge grow, your trading strategy will improve. Avoid drastic changes to your trading strategy.
Your goal is to achieve positive expectancy with every trade. Not positive profits for each trade. Statistics have to work for you.
One thing is the most important when you create your first strategy and enter the market for the first time. Don’t be stubborn on the market.
CHAPTER 13 – Should you trade Forex or stocks
Investors and traders have access to a growing number of trading instruments, from tried-and-true blue-chip stocks and industrials to the fast-paced futures and Forex (foreign exchange) markets. In order to make the best choice, you have to recognize which of these markets can be complicated. Many factors need to be considered
The most important factor may be the trader’s or investor’s risk tolerance and trading style.
As an example, buy-and-hold investors would prefer participating in the stock market, while short-term traders, including swing, day and scalp traders, may prefer markets where price volatility is more present.
For traditional buy-and-hold, “long-only” investors, stocks remain an obvious option for a lot of reasons. Stocks have a long-term history of positive returns and investors receive income from dividends. But when it comes to trading, forex trading has a number of advantages to offer. And you should think when deciding whether to trade forex or stocks.
Forex VS Blue Chips
Forex market is the global largest financial market. Many traders are attracted to the forex market because of its high liquidity, around-the-clock trading and the amount of leverage that is afforded to participants.
Blue chips are stocks from well-established companies. These stocks are able to operate profitably during challenging economic conditions and have a history of paying dividends. Blue chips are less volatile than many other investments and are often used to provide steady growth potential to investors’ portfolios.
Let’s take a look at some of the differences and similarities.
Volatility – Some traders, especially short-term and day traders, prefer volatility in order to profit from quick price swings in the market. The other traders are more comfy with less volatile and less risky investments. That’s why short-term traders are attracted to the forex markets, while buy-and-hold investors prefer the security provided by blue chips.
The forex market offers significantly higher leverage of up to 50:1, and in some parts of the world even higher. But it isn’t all good as it looks. While higher leverage provides the opportunity to build equity with a very small investment (forex accounts can be opened with $100), leverage can just as easily destroy a trading account.
Another consideration in choosing a trading instrument is the time period that each is traded. Trading sessions for stocks are limited to exchange hours, generally 9:30 A.M. to 4 pm Eastern Standard Time (EST), Monday through Friday with the exception of market holidays. The Forex market is active round-the-clock from 5 P.M. EST Sunday, through 5 P.M. EST Friday, opening in Sydney, then traveling around the world. The flexibility to trade during U.S., Asian and European markets, with good liquidity virtually any time of day, is a bonus plus to traders whose schedules would otherwise limit their trading activity.
Various trading instruments are treated differently at tax time. Short-term gains on futures contracts, for example, may be eligible for lower tax rates than short-term gains on stocks. Furthermore, active traders may be eligible to choose the mark-to-market (MTM) status for IRS purposes, which allows deductions for trading-related expenses, such as platform fees or education. It is strongly recommended that traders and investors ask the advice of a qualified accountant or some tax specialist, especially since trading forex can make for a confusing time organizing your taxes.
The internet and electronic trading have opened the doors to active traders and investors around the world to participate in a growing variety of markets.
The decision to trade stocks, forex or futures should be based on risk tolerance, account size, and convenience.
The internet and electronic trading have opened the doors to active traders and investors around the world to participate in a growing variety of markets. The decision to trade stocks, forex or futures should be based on risk tolerance, account size, and convenience. If some active trader is not available during market hours to enter, exit or properly manage trades, stocks are not the best option.
If some investor’s market strategy is to buy and hold for the long term, generating growth and earning dividends, stocks are a practical choice. The instrument a trader or investor selects should be based on which is the best fit of strategies, goals and risk tolerance.
CHAPTER 14 – How To Trade Crypto And Stocks / Forex
At first, we have to define the difference between crypto and Forex/Stock trading because you have to have theoretical knowledge.
– Crypto trading, or cryptocurrency trading, is simply the exchange of cryptocurrencies. Like in Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro.
– The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices.
– Stocks trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.
Let’s go further!
HOW TO TRADE CRYPTO with success
Crypto shows bigger growth than stocks or forex. Honestly, all of these types of investment are risky.
While Bitcoin is not the only digital currency on the market, it is indeed the first and most popular one and stands as the digital gold within the industry. The technology behind cryptocurrency holds a large part of its value. The secure way to identify a transaction and the way to transfer funds.
If you want to trade cryptocurrency you need:
1) A cryptocurrency wallet (or two).
2) A cryptocurrency exchange (or two) to trade on.
There are only a few things to know about trading cryptocurrency.
Trading cryptocurrency is simple to start, but there are some essential aspects to understand before you start trading and this is this is basic friendly advice to mull over not professional investment advice.
I’ll explain on the example of Bitcoin.
There are three ways you can trade Bitcoin with success:
1. Buy the underlying from an exchange or online cryptocurrency broker
For those who are willing to actively safeguard their Bitcoin, owning the underlying is clearly the way to go, but prudent steps must be taken to mitigate the risk of Bitcoin theft and/or loss of private keys (i.e., diversifying holdings across wallet/storage types, using two-factor authentication and strong passphrases).
2. Trade (buy/sell) a CFD (Contract for Difference) derivative and hold cash margin with an online forex broker or multi-asset broker.
Active traders looking to speculate on Bitcoin over the short or medium term may find that trading CFD/derivatives on Bitcoin using an online forex broker will provide them with 24-hour trading, potentially lower margin, and the ability to go either long or short. Because of counterparty risk, choosing a broker is just as important as finding one with the best trading tools or commission rates.
3. Buy a publicly listed security related to Bitcoin and hold shares with an online stockbroker.
For stock market investors, investing in Bitcoin indirectly through listed security such as an ETF, ETP, or trust may be suitable for those looking at taking a passive position. Active traders might find the limited trading hours and potential lack of volume a limiting factor that could hinder their trading. Overall, using listed securities that invest, track, or hold Bitcoin can be a viable alternative to diversify away from the risks of margin trading or safeguarding private keys when buying the underlying.
HOW TO TRADE FOREX with success
Forex, also known as foreign exchange, FX or currency trading, is a decentralized global market where all the world’s currencies trade. You can trade currency based on what you think its value is, if you think a currency will increase in value, you can buy it. If you think it will decrease, you can sell it.
All forex trades involve two currencies because you’re betting on the value of a currency against another. Think of EUR/USD, the most-traded currency pair in the world.
EUR, the first currency in the pair, is the base, and USD, the second, is the counter.
When you see a price quoted on your platform, that price is how much one euro is worth in US dollars. You always see two prices because one is the buy price and one is the sell.
The difference between the two is the spread. When you click ‘buy’ or ‘sell’, you are buying or selling the first currency in the pair. Since the euro is first, and you think it will go up, you buy EUR/USD.
If you think the euro will drop in value against the US dollar, you sell EUR/USD.
If prices are quoted to the hundredths of cents, how can you see any return on your investment when you trade forex? Leverage!
When you trade forex you’re borrowing the first currency in the pair to buy or sell the second currency. To trade with leverage, you simply set aside the required margin for your trade size. If you’re trading 200:1 leverage, for example, you can trade $2,000 in the market while only setting aside $10 in margin in your trading account.
However, leverage doesn’t just increase your profit potential. It can also increase your losses. If you are new to forex, you should always start trading with lower leverage ratios, until you feel comfortable in the market.
HOW TO TRADE STOCKS with success
Stock markets are places where buyers and sellers of shares meet and decide on a price to trade.
It is important to know that the corporations listed on stock markets do not buy and sell their own shares on a regular basis.
When you buy a share of stock on the stock market, you are not buying it from the company, you are buying it from some other existing shareholder.
There are many stock exchanges, many of which are linked together electronically which means markets are more efficient.
The prices of shares on a stock market can be set in a number of ways, but most the most common way is through an auction process where buyers and sellers place bids and offer to buy or sell. A bid is a price at which somebody wishes to buy, and an offer (or ask) is the price at which somebody wishes to sell. When the bid and ask coincide, a trade is made. If there are many buyers and sellers at sequentially higher and lower prices, the market is said to have good depth.
Stocks are quoted by their ticker symbol, represented by between one and four capital letters, which are often loosely representative of the company name.
A market order is simply an order that instructs the broker to buy or sell shares at the best available price. A market order does not guarantee the price you will get, but it does guarantee that you will get the number of shares that you want.
When an order is completed, it is said to be filled.
Stop orders are contingent on a certain price level being attained to activate the trade and your trade will be executed only when what you want to buy or sell reaches a particular price.
If you understand how the financial markets are structured you can use the same skill and experience to profit in all three.
In all three you buy low and sell high against the crowd.
There is no difference.
So, what Let me Waste Your Time wants with this articleTrading With Success – a guide for beginners?
To show you how is wonderful the world you are going to step in.
Trading is a lot like riding a roller coaster. It is fun and exciting, but there will be times when you feel scared, nervous or even powerless. When these bad times come, it’s important to not panic or give up.
And you will see what real freedom is. You can live and work anywhere in the world. You can be independent of routine and really be free.
A great trader is totally committed to being the best and doing whatever it takes to be the best.
Trading mastery is a state of complete acceptance of probability, not a state of fight it. So, the biggest enemy to your success is in your mind, in your attitude, in your lack of knowledge.
The secret to being successful in trading is to have an indefatigable and an undying and unquenchable thirst for information and knowledge
Don’t ever make the mistake of believing that market success has to come to you fast. Trade small, stay in the game, persist, and eventually, you’ll reach a satisfying level of proficiency.
Money is simply something you need in case you don’t want to die tomorrow. This is a reminder for you.
Try not to be obsessed with profits and losses.
In whatever you do, seek for enjoyment, heart, satisfaction, modesty, openness. Paradoxically as an unintended consequence, your trading performance will improve significantly.
We expect that in this article has provided some answers to get you start trading.
Wish you luck!
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Good luck from Let me Waste Your Time on finance Team!
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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.”