How easy is financial trading?
The world of financial trading can seem quite daunting to an outsider. Whether you’re looking at stocks, forex or other commodities, large sums of money change hands every day as fortunes are won and lost. There is also a complex lexicon of technical terms that seems guaranteed to baffle and confuse the newcomer. It’s little wonder that many people who would like to try their hand at trading are unsure about knowing where to begin.
In fact, though, trading is a lot easier to get into than you think. Although there is a lot to learn, the basics are surprisingly simple. Whether you want to create a diversified portfolio for long-term investment or become an active trader looking to make profits in the short- to medium-term, literally anyone can take up trading and stand a chance of making some money.
Learn your trade
The above doesn’t mean that you should dive straight in without doing any research or preparation, however. Even if you just want to put some spare capital into a fully managed portfolio, you should be clear about what your goals are, what options are available and the pros and cons of different providers. If you want to take a more active role, then you should read and study all you can about your chosen trading methods.
Look at the various forms of trading and the different markets and see which best suits your temperament and requirements. If you decide to try your hand at the foreign exchange market, then you can pick up a lot of handy forex trading tips online to get you started. Advice on trading in the stock market can be found in a similar way. Internet research is the best way to get a broad overview of what trading involves.
Once you know what kind of trading suits you best, it might be time to head for your local library. Books and specialist periodicals like the Wall Street Journal can give you a more in-depth perspective. Staying online, you can also find webinars and full-length courses that will equip you with the skills and knowledge you’ll need to become a successful trader. Just as importantly, you’ll gain confidence in your own abilities, which will help you to trade more assertively.
The next stage is choosing a broker. Shop around online and compare the services that different brokerages offer. Always read the small print, as well as independent reviews. Make sure that the broker you choose is set up to provide the kind of trading you have in mind, with a full complement of technical tools and indicators.
Make sure that the online broker you choose offers a virtual trading or demo account. This will allow you to safely practice trading without risking any real money. Of course, you won’t be able to build wealth from your successful trades either, but you will be able to see how your strategies play out in the market over time.
Demo accounts have many advantages, and you shouldn’t rush to graduate to a real account until you’re ready. However, be careful that you don’t get a sense of false confidence from getting lucky while virtual trading. Also, bear in mind that once you start trading with real money, it’s quite a different emotional experience, and this can lead to different outcomes. Practicing with a demo account is invaluable, but there’s no substitute for real-world, real-time experience.
Keep things simple
Once you start trading for real, keep things simple. Trading is essentially just about buying and selling, and hopefully selling for a higher price than you paid. Achieving this is largely a matter of timing: you buy when the price is low and sell when it is reaching a peak. Whatever strategy you adopt, keep this end goal in mind.
Be prepared for the fact that things won’t always go your way. A big part of successful trading is learning to manage your losses. Use stop losses and limit orders to help you exit an unprofitable trade before you lose more than you can afford to. Remember to never risk more than 1% of your trading capital on a trade.
Financial trading is easier than you think, and thanks to the internet, it’s now a field that’s accessible to all. That said, the more knowledge you have, the more likely it is that you’ll be successful. Treat every day as a school day and never stop learning. This way, your trading practice will grow with you.