So, a trader is a financial/stock market user who seeks to make a profit. At the same time, the trader directly works in the market: analyses the situation and concludes trade deals. If you want to trade on the market and avoid any brokerage fees, read this ECN trading guide and learn more about the trading possibilities.
A private investor is an individual who invests their savings to make a profit. An investor can be passive (work through a broker or just buy currencies, metals, antiques, or securities and wait for the best times to sell) or active (analyse markets and make deals).
That is, an active private investor who is ready to trade in the stock market as a job, analyse and conclude transactions, is a trader. If you are ready to connect to the platforms and start working with your savings, you are a beginner trader. And as a novice trader, you should know the basic things about trading and strategies – in order not to make mistakes yourself and not fall victim to scams.
Surely everyone is familiar with the concept of ‘bulls’ and ‘bears’ concerning the stock exchange. However, not everyone knows that these are the two main strategies of traders:
- Bulls are traders who expect a rise in prices, enter into a contract to buy assets, and wait for a new rise to sell more expensive and receive the difference as income. You don’t need to be a mathematician to understand that bulls stimulate asset prices to rise (there are purchases – higher demand – higher prices).
- Bears, as they say, play on the decline, enter into buy contracts, and wait for the decline in asset prices to buy as cheaply as possible. Obviously, bearish actions are pulling prices down.
However, this is not the only classification that traders’ strategies suggest. First of all, bulls and bears stand out in leveraged trading. Moreover, at different times the same trader can be both a bull and a bear.
Another important division in stock market trading is the types of transactions:
- Short trades – an asset borrowed from a broker is sold to further buy at a lower price. The debt is returned, and the difference in price settles on the trader’s accounts.
- Long trades – an asset is bought to sell it later at a higher price. The price difference is the trader’s income.
By the way, the names of transactions have nothing to do with their duration or the period of ownership of the asset – they can last for months or be made several times a minute.
There is one more crucial division of strategies:
- Trading with a trend – a trader opens trades in the direction of price movement. As a rule, this is ideal for a beginner as it is a simple strategy with minimal risks and the possibility of making large profits.
- News trading is an option for sophisticated traders. In this case, fundamental analysis is carried out first, and then trades for oppositely directed trends are opened.
Again, this is not an exhaustive list of strategies. Experienced investors never stick to one style – they change and combine strategies depending on forecasts, market conditions, and the specific type of asset.
But it is not enough to know strategies and classify yourself as bulls or bears. Successful trading requires knowledge of the legislation and trading rules, an excellent theoretical base, an understanding of the peculiarities of the functioning of the exchange and the stock market, planning and analytical skills, the ability to notice seemingly insignificant details, and, of course, free capital. Recall that it is worth starting at a low speed. And high-class specialists to help you – do not avoid the services of professional brokers and financial advisors.
Try to learn about Forex trading as much as possible. Use such databases as Forextime – you will find numerous articles and instructions there. They will help a beginner to understand the market and decide what strategy to choose. It is available for everyone – be it South Africa or North America.
Trading platforms for the trader
Of course, in the 21st century, one of the main assistants of an active private investor is trading platforms. They are widely represented on the market and can be accessed through your professional broker.
Beginners should start their immersion in the IT part of trading by studying the indicators and analytical charts that are located in the interface of the trading terminal. They are easy to read and help you understand the basics. And then there are two serious levels: software for professionals and software for automated trading (by the way, it is better to choose the one where the investor can analyse and change strategies).
For example, the QUIK and MetaTrader5 platforms are popular among traders:
- QUIK is a reliable and secure platform for trading on foreign stock markets due to data encryption. It provides a wide range of tools for analysis and trading, as well as a unique data refresh rate. For a trader to monitor operations and make deals anywhere and anytime, there are browser and mobile versions.
- MetaTrader5 is a program for trading instruments of the derivatives, currency, and stock markets with its own development capabilities. The platform, as follows from the name, is distinguished by the ability to create trading algorithms and reports in the MQL5 programming language.
There are other platforms, but their principle of operation is approximately the same: providing the most up-to-date analytics and the ability to make transactions from any working terminals. Everything else is implementation details.
Don’t hesitate to learn more about it and try to earn money by applying your knowledge. It is simple if you spend enough time studying all the peculiarities.