Technological advancements in the finance industry have lowered the entry barrier to trading. Now, anybody can start making money from the markets with a basic understanding of how the market works, decent trading capital, and the right trading tools. In fact, financial trading tools such as bots, trading algorithms, AI, and social trading makes it easier to become successful at trading without having advanced degrees or any specialized training.
Forex trading also known as FX trading or currency trading is the art of buying and selling currencies in the hopes of making profits on the difference in the value of such currencies in the global economic landscape.
Options trading is a form of derivative trading in which people trade contracts that give them the rights but not obligation to buy or sell an underlying asset at a predetermined price. Some unscrupulous brokers tend to make their trading process opaque, confusing, and complex as part of efforts to fleece out more fees, transaction costs, and commissions out of beginner traders.
You need to find a broker that would charge relatively low fees while still providing you with a full suite of resources to make your trading experience easier. The main differentiating factor between trading and investments is that a trader actively seeks out market movements for profit while an investor typically waits to profit from long-term price movements in the assets in their portfolio. A trader will typically make tens or hundreds of trades within a week while an investor is content to buy and hold an asset for months or years.
No trader can afford to underestimate the importance of a trading strategy — the first step in creating your trading strategy is to have a trading plan. A trading plan is akin to writing a business plan for an entrepreneurial pursuit. A trading plan helps you make logical tradition decision is periods of rapid market movement when you emotions might lead you to make rash decisions. Your trading strategy should include a market ideology — a specific goal getting out of debt, retiring early, making your first million acting as your motivating factor to seek your fortune in the market.
The trading chart above shows that Tesla has been in a consistent uptrend marked by rising support and resistant trend lines — for example, the stock is trending because of a catalyst such as a product launch or changes in management — in the last three weeks. Also, make sure your trading strategy contains a mix of fundamental analysis for example, global events, such as wars that impact oil prices and technical analysis trading rules based on price and volume transformations.
You should use this information to determine your entry into trades, your exit when the trade goes your way, and your escape when the trade goes against your plans.
Technology can help new traders lower the entry barriers to trading by automating many of the activities that could require a great deal of mental effort to track. Below are some pointers for using technology to become a better trader in the shortest possible time.
If you are trading stocks, finding the right ones can be difficult because there are simply too many to pick from. A stock screener can help you sieve through the thousands of stocks in the market to narrow down potential winners before their big breaks. It will help you identify top gainers and losers, stocks on turbo momentum, and stocks that are about to break out above resistance or break down below support lines, as explained above.
MarketWatch , Google , FinViz , Zacks among others offer free stocks screening software — your broker may also have specialized screening software on their trading platform.
The image below is a screenshot of a stock screen done on finviz screener. You can also automate your trades online by using a trading bot.
These bots are simply computer programs with instructions to execute a trade on your behalf based on a predetermined set of market indicators and parameters. Automated trading systems can be used to trade stocks, options, futures and foreign exchange products based on a predefined set of rules, which determine when to enter an order, when to exit a position and how much money to invest in each trading product.
Trading bots can increase the odds of success for newbie traders by bridging the gap between their inexperience and events in the market to make sound trading decisions. While you are at work, traveling, or sleeping, your bot will be looking for new opportunities to book gains in the market. Trading bots are especially helpful to beginner traders because they have logic on their side; they make trading decisions based on facts, whereas emotions and sentiments are likely to cloud the reasoning of inexperienced traders.
Many new traders tend to confuse trading bots with algorithm trading — yet they are fundamentally different. Algorithmic trading is simply a tool designed to help traders execute orders automatically based on pre-programmed trading instructions such as price, volume, and timing. The primary function of algorithmic trading is to help you manage costs and minimize risks. Using algorithmic trading for large orders can also help institutional investors or individual investors with deep pockets to avoid spooking the markets.
A third option beginners should consider if they want to reduce the trading learning curve, is social trading. Social trading is simply a type of trading in which traders rely on user-generated financial content, collated from a variety of networks, to make trading decisions. Social trading provides you the platform to be part of a community of successful traders so that you can distill the wisdom of the crowd to make trading decisions.
You can utilize social trading to engage in the trading of different types of securities such as stocks, forex, commodities, and cryptocurrencies. Social trading is also closely associated with copy trading — with copy trading you have an opportunity to copy the trades of other traders to make your trading decisions.
Not using a trading plan Many new traders are eager to enter the market to start placing trades and start making money. However, entering the market without a well-thought-out trading plan often results in massive losses.
Underestimating the importance of a trading journal A trading journal is a useful trading tool that can fast track your mastery of the markets. Recording all your trades, the investment thesis behind the trades and noting how the trades turn out can help you improve your trading acumen. A trading journal also makes it easy for you to do the post-trading analysis to crunch data and prepare for the next trade.
Sit back and let the hottest tech news come to you by the magic of electronic mail. Prefer to get the news as it happens? Follow us on social media. Got two minutes to spare? We'd love to know a bit more about our readers. All data collected in the survey is anonymous. Latest Insights Distract Full stack Investing 2. Developing a trading strategy The main differentiating factor between trading and investments is that a trader actively seeks out market movements for profit while an investor typically waits to profit from long-term price movements in the assets in their portfolio.
Using technology to beat the learning curve Technology can help new traders lower the entry barriers to trading by automating many of the activities that could require a great deal of mental effort to track. Stock screeners If you are trading stocks, finding the right ones can be difficult because there are simply too many to pick from.
Trading algorithms Many new traders tend to confuse trading bots with algorithm trading — yet they are fundamentally different. Social trading A third option beginners should consider if they want to reduce the trading learning curve, is social trading.
This post is brought to you by eToro. All trading involves risk. Only risk capital you are prepared to lose. Treat yourself Sit back and let the hottest tech news come to you by the magic of electronic mail. Enter Go to article.More...