1. Types of Financial Markets: Studying Basics of Trading!
1.1. Forex: How To Trade If Money is Commodity?
1.2. Stock Market: Why Are Shares and Indices Attractive?
1.3. Raw Materials Market – Invest in Commodities That Can Be Really Touched!
Greetings, dear traders! Today I will tell you about trading for beginners. Some of you will think it’s impossible. And, only too clever professionals with special education trade at exchanges. But, I can make you happier! Today, it’s not like that.
Almost everybody got access to financial exchanges, and some traders achieved outstanding results!
What’s to special education, it doesn’t indicate a successful exchange trader. Alexander Edler and Alexander Gerchik (from USSR), for instance, are too far from exchanges and finances, due to their professions. The former was a physician, and the latter worked as a taxi driver after leaving Odessa for the USA.
What unites these people and all those who have been trying to make money at financial markets? Surely, the eagerness to change their life to the better, and to acquire financial freedom! In this article, I will tell you about what you need to reach this. And, so far, let’s figure out types of financial markets. It’s the bedrock, because you will have to make your choice.
First, I want to look into the classification by the type of orders, as I consider this one the most important. So, we can specify two groups: spot-markets and derivatives markets.
Stock market and Forex belong to the first group. What does the term “spot” stand for? It stands for conditions of calculations, with which order payment is processed in a moment. And can it be another way? Yes, it can, when we speak of derivative orders. It is the second major group, containing so-called “derivatives” (derivative financial instruments). There, payments are made not at once but on date arranged in the contract. Derivatives are: futures, options and, actually, binary options.
To make our classification fully comprehensive, I will divide markets by assets. So, by assets division, there are the following types of financial markets:
Currency market is the off-exchange system created for carrying out international economical activity. In the world, it’s commonly known as Forex (Foreign Exchange).
Really, the main function of this market is to help companies from different countries to engage trading with each other. However, in last 20-30 years, this market has been actively maintained by those who want to gain incomes from rate differences (i.e. to engage speculative trading).
Main traders of this market are major commercial banks, investment and hedge-funds, Central Banks (i.e. US Federal Reserve), brokers, dealing centers and, of course, private traders. I, as all of you, belong to the latter.
Why is this market so attractive and how to make money in Forex? Let’s consider its main advantages from the point of view of a private trader:
History of stock markets starts long before the appearance of Forex. First similar exchanges appeared in Medieval (for example, in Japan). Their main goal is to match a purchaser of an asset and its seller.
In contrast to Forex, stock market is the market of exchange. So, its work goes at the certain platforms. And to allow an ordinary trader to trade at this market, it’s needed to contact a broker-provider of corresponding services.
What are noteworthy features of the stock market? First, there is a lot of financial instruments presented there! You are able to choose between shares and indices, spot-orders and derivative contracts.
Modern brokers of the stock market offer margin trading. It means you can buy shares not of their full value, but only for a little guarantee for a broker. It significantly increases your trading capabilities and is the part of the problem of trading for beginners.
Stock platforms are presented in most countries of the world. The greatest platform of the US is the New York Stock Exchange, NYSE. There, securities can be purchased, and indices can be traded.
The main goal of this market is to match purchasers and sellers of raw materials, and also to form prices for them, according to demand and supply. In recent times, raw commodities have been highly demanded among traders, considering fluctuations of oil prices. Great volatility and strong trends attract attention of those who want to get profits from rate differences and examine different types of financial markets.
With that, I finish describing main financial markets and proceed to the important and worthwhile point – first steps at the exchange and selection of a broker.
Before describing the process of selection itself and main criteria to be attentively considered while choosing, I want to emphasize the importance of working with a reliable and safe company.
The matter is there are very good and trustworthy brokers at the market (in concerns Forex, stock exchanges and binary options, of course), and there are frank cheaters there. How to distinguish the former from the latter?
Main criteria of reliability when solving the problem “how to choose a broker” is regulation and feedbacks. The former is objective, as a broker can either have a license or have none. The second criteria is more subjective. Traders leave feedbacks of working process of any company. But, quality of reviews can differ. Some of them can turn to be ordered by rivals.
Fact #1. There is a category of traders who leave negative feedbacks after the row of their own failures. Unfortunately, it’s the natural feature of a human – to blame others in our own trouble. There are many feedbacks like that, and I recommend pay no attention to them. They can strongly demotivate you, and, as a result, you will lose confidence in your abilities.
There fore, I mostly count on regulation. For me, a reliable broker is UTRADER. This platform has acquired the license since it has been founded by Russian Center for Regulation of Relations at financial markets.
What to pay attention for along with the license? There are some significant parameters that determine whether the broker suits you or not. Why did I start trading with UTRADER?
Fact #2. Simple and intuitive platform. You will be able to get on with all the nuances of opening orders within several minutes, and this is very important in you engage trading for beginners. And, you won’t even have to open a demo-account.
Fact #3. Minimal deposit of $200. Probably, it may seem for somebody that $200 is quite high amount. But, if fact, one can invest even more to start getting profits.
Fact #4. The opportunity of topping up in different currencies. It removes the plenty of restrictions for traders!
Fact #5. A pleasant moment of working with UTRADER is bonuses. With them, you will be able to increase your initial capital by two times. I think you agree that this is an awesome advantage.
Fact #6. In the question “how to choose a broker”, I pay attention at the number of contracts. It’s important for me that I can vary my strategies. Trading Up/Down is not always profitable. When there is a flat at the market, for example, I select the border. If a strong trend is upcoming, then I may try the high-profitability contract “One Touch”.
Fact #7. What is also important for me as a trader? Surely, money withdrawal. And, it’s the matter of not the number of payment systems (today, the majority of brokers offer the wide range of them) but of the extent of broker’s fairness to customers and to me, in particular.
Talking about UTRADER, I have never had any problems with withdrawing my money. It has always been made properly and in order. And in any volumes. Therefore, I fully trust my investments to this broker.
What to pay attention at after the broker is chosen? First of all, at the thing which trading is totally impossible without. I speak of specific knowledge at trading business. Don’t be scared! You won’t need any economical degree in order to realize how to make money in Forex. Nowadays, it’s by far easier.
Trading at financial markets is the skill to forecast quote fluctuations. In concerns everything: currency pairs, shares, indices, raw commodities. There are two approaches to solving this problem – fundamental and technical. And, they exist separately from each other. And you can study basics of trading in the article “Trader’s Encyclopedia”.
Fundamental method requires knowledge at economical theory. A separate article is written for it, which you can get acquainted with later. Technical analysis stands for mathematical calculations of price chart. Moreover, modern technologies let you acquire results in automatic mode. It means you won’t need to calculate anything yourself. Everything will be done by a computer. You just make decisions. More information about methods of technical analysis can be read in this material.
Trading for beginners – is it and difficult to start and to what extent? In order to answer this question, I will give a very simple example for you.
Let’s refer to the screenshot. In it, I purposefully highlighted two lines. One of them goes bottom-up, and the second, conversely, top to bottom. These lines are called trend lines. With them, you can determine the trend at the market. I use this method because it’s very comprehensive and one of the most reliable.
It’s quite easy to trade with this method. Trend line is built on two points of the chart. If the trend is uptrend, then this line is formed by two minimal price values. As you can see, after that, the price touches the trend line several more times and then bounces from it. Because of this fact, you can open several profitable orders and make money.
The second trend line is built on maximal price values (for downtrend, the trend line is always built higher than the price chart). It’s also quite obvious here. While the trend is developing down, we can money with it.
Along with this simple method, there is a lot of others. Passing trading tutorial, you will get acquainted with indicators, graphical models, patterns of candlestick analysis and price action. Surely, you won’t use all the tools of technical method of forecasting. Several of them are enough. In my arsenal, I always have 3-4 strategies for all cases. It’s enough to make solid money.
By the way, something about strategies. They are indispensable. System-approach in trading is one of the integral parts of success. A strategy stands for the certain range of analytical instruments which you will get trading signals with. They can be indicators, patterns or just levels. Moreover, other important aspects such as capital management, risk-management and psychology can be also included in the term “strategy”. You can read about a trading strategy that allowed me to gain several hundred dollars for just 1 day in the article “How to Make Money in 60 Seconds?”
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Another significant point of trading for beginners, which is indispensable for reaching success in trading, is capital and risk-management. It sounds quite difficult and serious. But, if cat, there is nothing too tough there.
Capital management is very similar to family budget. Having gotten the salary, you allocate it between expenses in order to make it sufficient for everything you need. And, expenses can be optimized and you may save some money.
Almost similar principles are actual for trading at the financial markets. Your deposit is your budget. It must be arranged so as you could feel yourself comfortable while working. A simple example. There are two traders – A and B. Each of them has the deposit of $200. Both of them trade with binary options.
Let trader A decides to invest $200 in the order. Trader B invests $10 in the same order (5% of their deposit). As a result, both of them are wrong in their forecasts. Trader A loses the whole deposit, while trader B wastes just 5% of their funds. In trading, only that one can become truly successful who can manage their deposit correctly. You can find information about recommended volumes of investments in the article about money-management.
What’s to risks, they can be managed by means of so-called hedging (insurance). It lies in purchasing several assets or contracts. Investors of the stock market often hedge their risks by making portfolios of different assets. If you trade binary options, just like me, you can use several types of contracts or basic assets.
Main mistakes of novice (and not only) traders lie in the fact they assess their capabilities incorrectly, from the point of skills and capital as well. I’ve already told you about it. But, another obstacle on the way to financial success can be plain lack of self-possession. By the way, at the first stage, when I was just starting diving into trading for beginners, I also met problems like mentioned, but I solved them successfully, so today, I trade quite successfully because of that.
So, which problems can occur? First of all, we speak of emotions. In the beginning of my trader’s careers, I couldn’t stop on time very often, being eager to make more and more money. Having caught a courage, I started opening orders without any consideration, and paid for that every time with a part of my deposit. Fortunately, I had realized principles of managing the capital, so I didn’t reach the full wasting of the deposit. Nevertheless, recklessness of some traders often leads to these consequences.
Having failed, I was frequently confused and scared to open new orders. This is the second negative emotion that hindered me from working. I started missing really good market entrances, losing the realization of how to make money in Forex. For some time, I couldn’t and didn’t want to implement psychology in my trading system. As it turned, I should!
I did everything kind of well. I was working with the strategy, got proper signals from my indicators, but sometimes I failed, and I decided it’s time to change something. As a result, I totally changed my approach to the work!
First, I stopped chasing for enormous profits. And it helped me to cut the percent of unprofitable orders. Instead of 30-40 per day, I had about 10-15, at the average, and even less. As a result, I worked only with maximally accurate signals of my strategies; all the entrances were clearly checked.
The second important point. Reducing unprofitable orders helped me to get rid of my fear. I made more and more confident and determined solutions. For sure, I stopped missing profitable positions, which let me multiply my capital by several times.
Optimization in opening orders helped me to solve another important problem – tiredness. Working at the financial markets is the struggle of intellects. Surely, after a while, I felt tired. Resuming trading, I exposed my deposit to greater risk. Having refused of trading in such moments, I started making much more money.
Is it really tough to make money at the exchange and to what extent? It’s impossible to give a single answer to this question. From the one hand, it is not that easy, as it may seem. Practice and knowledge are needed, and trading tutorial is indispensable. During getting the first and the second, losses may come. And, this is very difficult psychological point, especially for beginners.
From the other hand, when the goal is set, and you follow it, working becomes easier. Experience comes, together with knowledge. The feeling of being lost, which is the characteristic of most novices, disappears. With the course of time, you begin to forget how it was difficult. It seems to you, that it’s always been this way, and you have been always making money at the financial markets, and it was your vocation.
Which market do I prefer? Today, I am actively investing in binary options. Why so? It’s simple:
Binary options were specially developed in order to let traders get on with them without special preparation. It’s very significant in the problem of trading for beginners. Fixed risks are the great advantage. And other financial instruments don’t have that (except derivatives).
If you trade in Forex or at the stock market with margin system (using leverage), your funds at your deposit is the guarantee for a broker. Correspondingly, the only one wrong decision may lead to significant losses). Working with binary options, you will never lose more than invested in the contract.
Another great advantage of binary options is approachability and high profitability. You don’t need to have a great deposit for gaining reasonable profits. With binary options, your incomes don’t depend on the number of pips of asset price change. The main thing is meeting terms of the contract. And, in this case, your profits can make up to 70-90% (and in case of working with high-profitability contracts, even up to 400%).
Finishing my story about trading for beginners, I want to highlight advantages of such working. There is a plenty of them. Firstly, you become more independent. Even if you continue going to the office and completing job responsibilities, you acquire the additional income. Secondly, trading at the exchange is working in the center of events. Some of my acquaintances, who have nothing with trading activity, lost much because of oil prices fall. And, it concerns many people. But, as for me, I haven’t only saved my money but also multiplied it. Because, at the exchange, it doesn’t matter whether asset prices fall or rise. The matter is where you are at this very moment and which side you choose!
for binary options
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