Trading and trading on the stock exchange are well-known concepts that many have heard.
However, not everyone knows what it is and how you can make money in this area. And those who have even a little idea what it is are afraid to even get into this business, but why? What is it that scares a person so much? Perhaps this is due to the high risk and fear of losing the invested finances, and this is justified.
Those who do not understand trading can easily lose a lot of money in one moment, especially if they have not previously studied the forecasts and the rules for creating bets. To prevent this from happening, it is worth knowing what trading is and how it works.
What is trading
So what is trading in plain language? Many perceive it as a game of roulette and think that in this case everything depends on luck. This means that after a person invests money, he does not realize that in order to make a profit, it is necessary not only to wait and hope for luck, this requires certain knowledge and skills. Only this approach in most cases ends with the loss of the entire deposit.
Other people who understand the basics of trading use stock trading to earn extra money. And only a small part of brokers’ clients know that trading can be turned into a main activity for getting excellent earnings. At the same time, there is no need to rent a room, pay a lot of money for office rent, and spend finances on other expenses.
Of course, some financial investments will be required, but they will not be large, and with a competent approach, they can be quickly replenished several times over. You will also need a good technique from the list below to work:
- Computer (laptop);
- Mobile phone or smartphone with applications installed;
- Initial deposit between $10 and $100 (USD).
Who is a trader and what does he do
The concept of “trader” appeared not so long ago, it is based on many facets, fundamentals, but they all come down to one thing – to trading in world markets. Each of them has certain specifics, distinctive features, but the methods of analysis are based on the same theories.
Every trader must have the following qualities of character:
- He must remain patient even in the most stressful situations;
- Must exclude emotional factors when making decisions;
- Wait as long as it may take to fulfill a pre-set forecast;
- He must be able to make decisions on his own.
Types of traders
Conventionally, traders are divided into several groups depending on the form of ownership, duration, purpose of the transaction, location of the workplace. Each of them has certain features.
By ownership
According to the form of ownership, traders are divided into two types:
- Professionals are people who have certain knowledge and special education. Usually, economists, financiers, marketers are engaged in trading on the stock exchange. Some graduate from special trading schools. For professional traders, conducting currency transactions is the main type of income and a permanent job;
- Lovers. Representatives of this group do not have special education. They prefer to engage in trading in their free time from work, they attribute it to their hobbies. They do not often achieve high results, many give up halfway through. Some of the amateurs may gradually move into a group of professionals, but for this they need to receive a special education.
By duration
According to the duration of transactions, traders are divided into the following groups:
- Day trader. He makes transactions within one trading day or one trading session. It closes all positions before closing the trading day – day trading. Often he has a small amount of capital;
- Scalper, Pipser. Produces a large volume of transactions with a short duration – from a few seconds to tens of minutes. During the implementation, there is a small effectiveness of one transaction, but it is justified by a large number of transactions;
- Position trader or short-term trader. It carries out transactions with a duration of several days. Closes them before periods of reduced liquidity (before holidays, summer vacations, and so on);
- Medium term. Produces several transactions per year. It closes them when weekly trends change;
- Long term. The period of transactions can last for several years. They are closed when global trends change.
By deal goals
Depending on the purpose of transactions, traders are divided into the following types:
- An employee. He ensures the full conduct of various operations or fulfills customer orders, for example, buys currencies on the stock exchange to pay for the purchase of equipment or sells foreign exchange earnings in order to pay wages in the future. Usually these functions are performed by professional traders;
- Investor. These participants in trading on the exchange consider the transaction as an investment;
- Speculator. Makes a deal to profit from the price difference;
- Arbitrator. Carries out counter transactions – one purchase, another sale. At the same time, he uses related instruments, this allows you to make a profit on the price movement of one asset relative to another;
- Hedger. Representatives of this group make transactions in order to reduce or fix the level of risk. More often this type of traders is used by commodity producers in the form of options and futures to be able to provide financial planning within the production cycle.
By workplace location
According to the location of the workplace, traders are divided into the following types:
- On the floor, in the hole. This group includes intraday private traders who trade on the floor. Their workplace is located at the lowest point – in the pit. Usually the conclusion of transactions is made on the same security. Traders enter into trades, hoping that in minutes and even seconds, he will be able to purchase a reimbursing contract and win a small profit from this;
- In the hall. This type includes professional traders representing the interests of a large number of clients or large orders. Their workplaces are usually located above the floor level of the exchange pit;
- At the monitor. Traders conduct the trading process through specialized trading platforms for trading, which allow you to see the orders of other traders, read the news, view the history of quotes, perform its mathematical analysis and build charts. Often, the Internet is used as the main communication channel between a trading terminal and a broker or exchange.
Slang
The terminology of trading for many may not be clear and surprising, but if you plan to do this type of income in the near future, then it is better to first consider the slang of trading on the stock exchange. Knowing the basic concepts will make learning much easier.
Consider the most common trading terms:
- Short. This term comes from the English word “short” – short. In the exchange market there is a concept of short and long positions. But they have nothing to do with the size of the deal. A short position means selling a pair, and a long position means buying a financial asset;
- Sell. This term is from the English word sell, translated means to sell;
- Buy. This is a trading position to buy a currency;
- Used. Means breakeven level;
- Wolf. A market maker, a successful trader with a lot of capital, who can influence the market and earn super profits;
- Cross. These are cross rates – EUR/CHF, AUD/NZD;
- Loss. This term means stop loss, namely, closing a trade on a stop order.
Features of building earnings on trading
How is trading income built? This question worries many beginners and beginners in this business. After all, this is a business, and it should bring a good income. But for this, it is important to first study the basic subtleties and nuances of trading on the stock exchange.
Profitability trading is a standard trading on the stock exchange according to the ancient principle: buy low and sell high. To carry out transactions, different assets for trading can be used, tools for analyzing the market situation, trading for beginners, and so on are provided to choose from.
But why don’t many people do it? It’s all about the presence of risk and the danger of losing all the money invested. And people always need guarantees that can ensure the complete safety of their deposit. Because of this, they miss out on many ways and options that can provide them with huge income from trading.
But it’s not so easy to come to the streets and start making money on trading. For this reason, it is necessary to work through representatives. In these situations, the investor will always be able to consult with the managers of the selected company, and they will help him to carry out profitable transactions. The fact is that these companies are interested in making a profit for their customers, because their income also depends on it.
How much does a trader earn
So is it possible to make money on trading? This question often arises among those who have not yet tried to do this business. You can get a good income quickly enough, but only if you follow the basic principles and rules when conducting transactions. For beginners, it is recommended to start with training in trading, which will help you understand basic things.
The average trader can earn quite decent money on the stock exchange. His earnings can be much more than the average manager or middle-level clerk. The main advantage of this work is that you do not need to be attached to superiors or to a place.
Experienced speculators can earn up to 20% per month on the exchange, but this figure is not always maintained. Sometimes it can increase by 2-3%, but it can also decrease by the same figure. For this reason, it is worth paying attention to annual earnings, and they can be from 20 to 50%.
What determines the income of private traders
Private traders usually trade on the stock exchange on their own. They have a much smaller deposit than corporate speculators (banks, brokerage firms, insurance companies, and so on), but they can still make decent money from this business.
To understand how to make money on trading, it is worth considering what income may depend on:
- Deposit amount. If its volume is $100, then it will be possible to earn $2-5 per month. If its size is already 10 thousand $, then the profit per month will be 200-500 $;
- Trade style. Different traders can use different types of trading. Someone works on the news and earns decent money, others prefer a less volatile market and receive less income;
- Selecting an instrument for trading;
- Deadline;
- From the trading platforms and strategies used.
Types of trading
Before you start actively trading on the stock exchange, it is worth considering the basic trading strategies. For Forex and the stock market, they are the same. But there are some features that every novice trader should know. Therefore, you need to study the popular types of trading.
Scalping
The name is directly related to the medical instrument “scalp”. This method involves actually scalping each price move. As soon as a small profit appeared after the opening of the transaction, it is immediately closed. With the right approach, scalping can make good money.
Medium term
Medium-term trading means trading on timeframes – “1 hour”, “4 hours”, “Day”. New trading platforms have additional intervals, but they are not popular yet.
Long term
In trading, a long term is a time interval that is longer than one day. Usually it is a week, a month or more. But many traders do not like to wait for a month for profit. These terms can only be used by large corporate players – insurance and pension funds, central banks.
Discrete
This type involves independent trading without the use of clear actions. You can choose your own plan, but you don’t have to follow it. This means that the trader has complete freedom of action.
This is a popular trading option on the stock exchange, which is often chosen by beginners. But they must remember that in order to get a good income, it is important to know the main laws and features of the stock market.
Algorithmic
During this type of trading, trading is carried out, in which the basic rules of the chosen strategy are clearly observed. To do this, you need to choose a ready-made tactic and make deals in accordance with the algorithm. This option is the most suitable for beginners.
How online trading works
Online trading is a popular method for making good money. To do this, it is not necessary to rent a room, purchase expensive equipment, and also adhere to a strict schedule. You can safely work independently on a computer without bosses and production standards.
To trade at home, it is enough to have a personal computer or smartphone and an Internet connection. And below is a step-by-step instruction for beginners, which will help you understand how to make money on trading:
- First of all, you should choose a broker with which you will work. This is quite a difficult task, because there are many companies provided on the market. However, do not forget about scammers who will not let you earn money;
- Beginner traders are advised to first study the main brokers who have been trading for more than 10 years;
- Next, you should register on the official website of the brokerage company. This process is simple, it takes about 5-10 minutes;
- After that, the deposit is replenished. The amount can be different, but many dealing centers offer cent accounts, which can be replenished with as little as $1. Of course, the amount is not large, but even on it you can gradually earn good money;
- Next, the trading terminal is downloaded. The official website of the dealing center will definitely have a link to it. You can also trade on online platforms;
- After that, the terminal connects to its account. To do this, you must enter your login and password, then you can see the deposit.
Books on trading
If you want to review the principles and basic strategies of trading in the stock market, then you should look for the best books on trading. In them, the whole process is described in the most understandable and accessible language, so you really won’t waste your time and learn a lot of useful things.
Consider useful books on trading for beginners:
- The Art of War by Sun Tzu. This book is not about trading, but about military strategies and politics, knowing which you can win in any battle;
- The Way of the Turtles, Curtis Feis. This is the first book written by a participant in the legendary trading experiment. The book details what and how the initiator of the experiment, Richard Dennis, “Prince of the Pit”, as he was called in exchange circles, taught beginners;
- “The Grail of the Exchange or the Adventures of the Trader Pinocchio”, Alexander Gerchik and Tatyana Lukashevich;
- “Trading with Dr. Elder. Encyclopedia of the Stock Game”, Alexander Elder.
The best trading books will teach you how to correctly calculate moves, conduct detailed analysis of actions and make trades that can really make a profit. These works will develop perseverance in you, teach you to suppress emotions that often make you make erroneous decisions.
Where to learn trading
Trading in 2019 has not changed, it has the same principles and basics that you need to learn before you start trading on the exchange. It is imperative to consider the basic principles of the market, the essence of strategies, only after that you can start trying to trade on the stock exchange.
Trading training for beginners should be based on the study of the initial fundamentals, without which it is impossible to even enter the market. Typically, training is divided into two areas “Beginner Trader” and “Advanced Trader”. If you do not have any experience in this area, then you should choose the first program.
Also, trading training can be carried out in several ways:
- Self-learning. It involves reading books on trading and working out what you read in practice on stock exchanges using small amounts. You can also use different sites with a description of this area, on them you can find the basic principles and rules of trading on the stock exchange;
- In-person. This option is available for large cities where there are offices of well-known brokers. They often host training sessions led by trading professionals. At the seminars, they tell everything about trading in the market, explain its features, nuances;
- Learning online. This option is considered the simplest and most affordable. Any company has special training courses in the format of webinars. They are often posted on YouTube. You can watch videos at home, sitting at your computer at any time, and if necessary, you can turn them on again. They will also help you decide exactly whether it is worth trading on your own.
They will explain the best trading strategies that will help you understand how stock trading works. Other than that, they will provide the best trading platforms for doing trades on your own (for a fee, of course).
