Education

How to become a day trader on the stock markets

How to become a day trader on the stock markets

Day trading is a high-risk, high reward profession that requires intense research and learning about the industry. To start your career as an aspiring day trader, you’ll want to find someone who can help guide you in all aspects of this challenging field, from broker selection down through the account opening process; once those steps have been taken care of, it’s time for action.

Some brokers offer demo accounts that allow you to test out your strategies without any risk. These are great for getting comfortable with the trading platform and learning what works best in different markets but remember it isn’t always easy, so don’t get too confident! It can take time before real money is involved- stay patient when things go south sometimes because there will be plenty more opportunities than just winning right away.

We all lose from our portfolio eventually; however, if we continue practising and improving skills, future profits should come much more manageable.

Research the industry

The first step to becoming a day trader is to do your research. It means learning about the different strategies, products, and markets available to trade. It’s also essential to understand the risks involved and how to manage them. There are many resources available online and in libraries.

Learn the basics of day trading

Day trading is a very challenging and stressful activity. It would be best if you never dived into it without understanding the basics of how to do so, which includes learning about different order types and chart patterns or technical indicators that can be used when looking at graphs of prices over time (like MACD). There are many free online resources if you want more information on these topics, but there are also paid courses for those who wish less work cut out just getting started with their education.

Find a broker and open an account

Not all brokers are the same, so your next step is to find a broker that offers day trading services and open an account. Be sure to compare fees, platforms, and services before choosing a broker. It’s also essential to ensure they offer access to the markets you want to trade. Once you’ve found a broker you like, you can open an account and begin funding it.

Demo trade to learn the platform

If you’ve chosen your preferred broker and opened your trading account, it’s time to start trading. But before you risk any real money, it’s important to first practice with a demo account. It will allow you to get familiar with the broker’s platform and how to place trades. You’ll find that the demo account offers loads of benefits as you can also test different strategies without risking real money.

Start trading with real money

Once you feel comfortable with the platform and understand how day trading works, it’s time to start with real money. Begin with small position sizes and only risk a small amount of capital. As you gain experience, you can gradually increase your position sizes and begin to take on more risks.

Stay disciplined and patient

Never forget that a vital aspect of becoming a successful day trader is to stay disciplined. It means following your trading plan and sticking to your strategies even when things get tough. It’s imperative to stay patient and wait for the right opportunities. Don’t force trades just to make a quick profit.

Keep learning and improving your skills

The journey to becoming a successful day trader is never-ending. There is always more to learn and new skills to develop. So, make sure you keep learning and growing as a trader. This can be done by reading trading books, watching trading videos, and attending seminars.

Have fun

Finally, remember to have fun while trading. If you’re not enjoying it, you’re likely to make bad decisions. Trading should be seen as a fun challenge, not as a job. So, take some time to relax and enjoy your profits.

A final word

In conclusion, becoming a day trader is not an easy task. However, if you do your research, learn the basics, and practice with a demo account, you can succeed. It’s important to stay disciplined, patient, and have fun while trading. Keep learning and improving your skills to continue success in the future. Happy Trading!

How do beginners trade stocks?

How do beginners trade stocks?

When you first take up the hobby of stock trading, it can be not easy to know where to begin.

 

We’ll break down each step in the buying process, starting with setting up an account and choosing which company to invest in.

Create an account

Firstly, you create an account on a stock trading website. You can sign up for the most significant sites online; the process only takes about ten minutes.

 

Once you’ve signed up, it’s time to fund your account! There are two main types of accounts that traders use.

 

A cash account is used when an investor doesn’t want to risk any capital on the market – they want to invest small amounts over time since there are no opportunities for quick returns using this type of account.

 

There’s the margin account for more aggressive investors looking for high-risk, high-reward investments.

 

This type of account uses borrowed capital to make more significant trades that can potentially generate larger returns and pose a much greater risk of financial loss.

What kind of trader are you?

Before you start trading with cash or margin accounts, you need to figure out what kind of trader you are.

 

Are you the type of person who likes investing small amounts over time? Then a cash account is probably correct for you.

 

On the other hand, if you think that your investment decisions are best made by quickly moving in and out of stocks before their prices have time to fluctuate too much, then it would be better for you to invest using a margin account.

Looking at companies

The first step is looking at the market indices and seeing where we stand as a whole.

 

The S&P 500 index, consisting of 500 leading U.S companies such as Apple Inc., Google Inc., and McDonald’s Corp., is an excellent place to start if you want to invest in established U.S businesses that sell goods or services worldwide.

 

Dow Jones Industrial Average is also a well-known index; it focuses on 30 large American companies and their domestic business operations.

 

On the other hand, investors with more interest in international markets would be better off focusing their attention on BRIC Index, which includes national indices from Brazil, Russia, India, and China, the fastest-growing countries in the world.

 

The MSCI World Index is a good alternative if you want to invest in companies from all over the globe instead of just focusing on a few specific regions.

 

Once you’ve decided which market to focus your attention on, it’s time to start looking for companies that interest you.

Potential investments

To find potential investments, investors use screening tools such as filters and screeners that narrow down their options based on P/E ratio or dividend yield criteria.

 

Once they know what kind of company they’re looking for, they can see whether any companies fit the bill by viewing complete profiles for each public company.

 

Afterwards, we should look at each company individually and make sure it fits what we’re looking for.

 

From here, it’s time to open up an account with your broker (most brokers are okay with opening accounts online), fund your account and start trading stocks.

 

When looking at potential investments in terms of profitability per year, some investors prefer to look at earnings before interest and taxes (EBIT) instead of net profit or earnings to get a more accurate picture of the company’s profitability.

 

Another popular metric among investors is gross margin, which measures how much money a company makes from goods and services without considering operating costs such as labour and materials.

In conclusion

It’s worthwhile to spend some time reading articles and other financial news about any companies we’re considering investing in so we can gain as much insight as possible before buying shares.

 

It will give us a better understanding of its position in the industry and what kind of events might affect its price movements.

 

When buying stocks, it is essential to know financial ratios such as EBITDA margin, gross margin and dividend yield so you can separate good opportunities from bad ones.

 

Once we know more about how these work, we will be able to make informed decisions when trading stocks.

 

 

 

Drawbacks of investing in bonds vs stocks?

Drawbacks of investing in bonds vs stocks?

Bonds and bond funds are a popular investment choice for many Americans. They are widely available, with little risk, and have yielded high returns historically. However, there are good reasons why most financial advisers do not recommend investing in bonds as heavily as most investors do. Despite their drawbacks, however, they are still among the safest ways to invest money, which is why most long-term investors hold some portion of their portfolio in them.

 

Mutual funds offer an excellent way to diversify even small investments over large stocks at once. Bond mutual funds can be advantageous for those who cannot afford or don’t wish to purchase individual bonds. However, mutual funds that contain only bonds operate under different rules than stock mutual funds, and there are several drawbacks you should be aware of before investing in them.

Expense ratio

First and foremost, bond mutual funds almost always have higher fees than stock mutual funds. The expense ratios for most bond mutual funds range from 0.5% to 1%, while the average stock mutual fund has an expense ratio of just 0 . 17%. These fees can quickly eat away at your profits, so it’s essential to compare the costs of various funds before investing.

In addition, when interest rates rise, bond prices fall. It’s known as “interest rate risk.” Because a bond’s value is directly related to the interest rate at which it can be re-sold, a bond issued when interest rates were at their nadir cannot be sold until these rates rise again to make the bond profitable for its owner.

Fluctuations in inflation

The other risk that arises from interest rate fluctuations is inflation, which occurs when the prices of goods and services increase throughout an economy. When this happens, it decreases the value of money since each dollar becomes relatively less valuable than before. Because bond prices are tied to interest rates, they will fall in value as inflation rises. It means investors should expect lower yields on their bonds due to inflation even if nominal interest rates stay low or decline further.

Interest Rate Risk

As stated above, a bond’s value is related to how much can be resold—an inverse relationship exists between the value of a bond and interest rates. Inversely, if interest rates go up, the price of a bond goes down. It’s not only common sense but also backed by academic research. Several theories determine how much a bonds price will drop in response to a change in interest rates, under what conditions they may fall more or less than some predicted amount, and even when bonds might rise due to a rise in the general level of interest rates.

High fees

Second, the high fees associated with most mutual funds sold on the market today make them poor investments for short-term investors. The average expense ratio across all mutual fund assets is 0 .25%, while any given bond mutual fund’s fee can be up to 1%. However, these fees are charged regardless of whether or not investors make money on their investments. Because short-term investors can quickly get out of a mutual fund before these fees start to eat into returns, they should only invest in bond funds if they’re willing to hold for several years, if not longer.

 

Suppose your investment goals don’t fall within the time frame during which you expect interest rates to rise; investing in bonds is a safe choice that will help you grow your wealth over time without taking much risk at all. However, suppose you need your money soon or intend to withdraw it as quickly as attractive returns appear elsewhere. In that case, you should be wary of the risks outlined above and consider other types of investments.

In conclusion

There are several drawbacks to investing in bond mutual funds. Although they can be advantageous for long-term investors, short-term investors and those who don’t want to take the time to select and monitor individual bonds individually should stay away.

Reversal strategy in forex trading

Reversal strategy in forex trading

Forex is the short form for Foreign Exchange and it is a market where currencies from different countries get traded. In this market, traders buy or sell currencies at current rates to make a profit.

What is a reversal strategy?

A reversal strategy in Forex trading means that a trader takes advantage of price movements going against their ‘trend’, i.e. when a currency stops going up or starts going down instead of continuing its previous trend. This strategy works well if the ‘trend’ has been strong enough to have lasted for some time and it’s possible to determine the very moment when the trend might be reversed.

In Forex trading, several factors affect prices through what is known as technical analysis. These include the foreign and domestic money supply and inflation rates, interest rates, and more. While some of these factors can be controlled, others cannot.

How to use a reversal strategy

To trade using a reversal strategy in forex trading, traders should learn how to identify the trend in prices at any given time. This makes it possible to determine when the trend might reverse. In this context, the most popular ways of identifying trends involve looking at charts with different types of price activity over a certain period of time. These trends give clear indications if a currency is going up or down after a specific time interval.

Every type of charting used for comparison involves plotting two sets of data against each other by using lines within the chart area itself. One set of data is known as ‘trend lines’ and the other one is called resistance and support levels. Trend lines are usually straight or wavy lines that connect at least three or more low points (or high points) in the chart area. Resistance levels are shown by horizontal lines around prices where many traders will attempt to sell at these price points. As for support, this is defined by a series of ascending prices, meaning it’s the level where buyers congregate to buy what they can afford before it goes up even more.

When these patterns become visible on charts, it shows that there might be a reversal coming soon, i.e., when the trend line changes direction and starts going down instead of continuing its previous direction upwards. This strategy works well if the trend has been strong enough to have lasted for some time and it is possible to determine when exactly it might be reversed

The two types of reversal trading

There are also two types of reversal patterns in Forex trading: reversal candlestick patterns and reversal bar patterns. Candlestick patterns are graphical formations that are made up of one or more candlesticks. These formations give clear indications as to whether a trend might reverse or not. Bar patterns, on the other hand, refer to the different types of bars that can form on charts and these also give indications to reversal moves.

Reversal strategy in Forex trading is based on the assumption that when a currency has been going up for some time and it reaches a resistance level, it is likely to start going down instead. This happens because, at this point, many traders who have bought the currency at lower prices will attempt to sell it at higher prices, thereby reversing the trend. The opposite is also true; when a currency has been going down for some time and it reaches a support level, this is likely to start going up again. This happens because, at this point, many traders who have sold the currency at lower prices will attempt to sell it at higher prices to take advantage of an increasing trend

Another example where the reversal strategy works well is when you see that there are no more buyers or sellers in the marketplace. As soon as this happens, most individuals with prior knowledge regarding the situation would go against the flow and try to sell their currencies in case they want to get out of trading them altogether. This can be seen in what is known by traders in Forex trading as; ‘no-trade zone’.

In conclusion

When one applies this strategy cautiously and doesn’t rely on it too much, it can be a very effective means of profiting in Forex trading. It is important to remember that not every trade will result in a reversal and sometimes the market will just move sideways. So, as always, traders should use stops to help protect their positions and minimize potential losses.

 

 

 

 

 

How to Spot and Avoid Forex Scams – For Newbie Traders

As a beginner in forex trading or someone who has shown interest in forex trading, you will be a prime target for various forex scams and online schemes. Most forex scams take place online although a fair number of offline schemes happen too. How do you spot a forex scam and what can you do to better protect yourself from scammers and fraudsters after your money?

The rule of thumb when it comes to forex trading is to know what you are getting into first before you make a deposit. Do your research and be confident that you understand what forex trading entails and whom to trust with your money. Online review websites and discussion forums like r/Reddit should also be your friend if you want to avoid known forex scams.

5 Red Flags to Look for When Getting into Forex if you are new

Fake Forex Websites

Fake trading platforms or forex websites that purport to help traders access the markets are the newest forms of forex scams. In this scam, a person will create a website with all the bells and whistles of a trading platform. However, whenever a new user creates an account and makes a deposit, they lose their money because they can’t make withdrawals.

Fake forex websites come in various forms and designs. Some are easy to detect while others are so well-engineered that it will take a seasoned hacker to spot them. However, the following red flags can help you detect a fake forex website or trading platform:

The website does not support secure payment processers

Scammers will never allow secure payment processors like PayPal because they don’t want users to request refunds. Most of them prefer less secure payment methods like bitcoin, credit card, or bank transfers.

Scammer use copycat homepages

Be on the lookout for forex websites that copy the homepage of a well-known broker or trading platform just to trick new traders into depositing to the wrong account.  Always check that the web address or URL at the top of your browser is authentic. Well-known forex brokers rank at the top of Google results pages so you are safer accessing them from a normal web search.

Fake forex websites have no contact information

Double-check that the forex website you are accessing has verifiable contact information and a physical address.  You can go the extra step and give them a call or verify their contact information using third-party tools.

Fake forex platforms do not have helpful information and blogs

If the forex website you want to use does not have any forex trading guides, tutorials, and a blog, it should be a red sign that the website is a scam.  Authentic forex websites publish up-to-date guides and articles on forex that can help beginners learn how to trade and make a profit.

The platform or broker does not support established trading platforms like Metatrader.

If you cannot link your broker to a well-known platform like MT4 then you should probably be looking elsewhere unless you know the broker well enough.

Fake Forex Support Websites

In this scheme, scammers create fake support websites that appear to belong to established brokerages or platforms like MT4. If a trader happens to land on these fake support pages, they will be tricked into giving access to their accounts to these scammers.

To avoid falling victim to support scams targeting forex traders, you should only access the support page through the broker’s official website or get their contact information directly from the website. More importantly, you will never be asked to send or give your login credentials by the official platform owner. They don’t need it because they already have internal support tools that help them access your account from their end whenever you need help.

Scammers That Promise To Trade For You

This type of scam happens both online and offline. While it is possible to find legitimate traders who will take your deposits and trade on your behalf, you should be careful when getting into such an arrangement. A lot of traders end up losing their deposits to unscrupulous traders who gamble with other people’s money or simply aren’t interested in forex trading.

You should especially be wary of traders who promise big gains as part of their customer acquisition strategy as this is usually a huge red flag. Forex trading is a risky venture and it’s unlikely that they will always make profits.

There are a lot of scammers out there after your money because they know anyone interested in forex trading has money to spend and is ready to make a deposit. Do your homework and make use of the information on forums to avoid such scams.

Forex Trading Managed Accounts-Pros and Cons

When you are new to foreign exchange trading, it is challenging to understand the currency movements or the analytics used for trading. Furthermore, it is even harder to predict how different aspects influence the financial markets or establish how to handle leverage or when to enter or exit a position for good returns. These reasons and more make some investors look for professional brokers to trade on their behalf using managed accounts.

Suppose the owner of a forex trading account has a thorough understanding of market behavior. In that case, they may be in a better position to determine if another person would perform a better job trading the foreign exchange market than they could do themselves. It may be advantageous for both novices and the more experienced traders to open a forex trading account with a reputed forex account manager.

How a Trading Managed Account Works

The first step to opening a managed forex trading account will be to look for a broker that offers such services because not every brokerage does so. The broker then opens an account for the investor. The investor deposits some money into the newly created account for the trading to begin.

Before trading begins, the investor and their financial advisor sign a legal agreement called a limited power of attorney (LPOA). The legal agreement seeks the investor’s permission for the account manager to trade on their behalf.

The consequence of granting this permission enables the account manager to link their account with the investor’s account. It also ensures instant copying of any transactions carried out on the master account of the manager over to the account of the investor.

Even though the investor’s account is under an account manager, only the investor can have complete control and access the trading account. Investors may see their account balance at any time, as well as the daily trading activity. They can withdraw or deposit money anytime they want without incurring any penalties.

Pros and Cons of Using a Forex Trading Managed Account

Opening a forex trading account may also be an ideal option for investors acquainted with the market but are conscious of their limits as traders or are too busy to trade. As such, they prefer that professionals manage their trading accounts. Trading using a forex trading managed account offers significant benefits, but there is always the possibility of disadvantages.

Pros

Amongst the most significant benefits of a managed trading account is the expert help provided to you by the broker or brokerage firm. If you are a novice trader, it can be extremely challenging to succeed in the foreign exchange market. Sometimes, it may require trading for a few years until you are confident enough to trade independently.

Using the services of an account manager enables you to delegate the management of your transactions to a qualified and competent forex trader who takes care of everything on your behalf. You can choose to do other things without having to worry about your investment.

Using the services of a trading account manager also enables you to begin trading right away without learning about the technicalities involved in the Forex market for months on end. It will also allow you to reduce the time required to understand your trade and begin generating money almost instantly after you begin trading.

Managed forex accounts save you valuable time because all you need is to set up your account, and the account manager will handle all the trading transactions.

Cons

Some brokers charge a certain fee for every transaction, while others charge a fixed price. Whichever way, opening an account with an account manager will require you to spend a substantial sum of money. You also have to determine whether using the services of an account manager will be worth what you spend to open and maintain the account.

Trusting someone else to trade on your behalf means you will have no control or influence over the transactions. You are putting your whole investment in danger in the hope that the account manager will make profitable trades. Suffice to say; you may also be looking at significant losses.

Wrapping up

Forex trading has the potential for both loss and profits, which is why some prospective traders choose someone else to trade on their behalf rather than take on the risks by themselves. Before you think of allowing an account manager to run your trading transactions, you must ensure that they are the right ones, with a reputation to protect. A forex trading managed account has many benefits, but you should not forget about the drawbacks.

6 Simple Ways to Avoid Losing Money in Forex Trading 2021

6 Simple Ways to Avoid Losing Money in Forex Trading 2021

Contrary to popular belief, forex has no holy grail, nor is there a one-size-fits-all strategy to profit trading. While many traders have perfected the art of reading market trends, there is still no way of predicting how market forces will sway.

That said, trading does have some semblance of an exact science, and there are several ways you can use fundamental data and various technical indicators to achieve profitability. 

Continue reading…

Fundamentals Of Trading On The Forex Market

The forex market is the largest globally. In essence, it is a platform where currencies are exchanged. It is an important subject matter to traders and non-traders alike because it affects global price movements. Forex is generally used for speculating, which has the potential of bringing in a profit, and hedging, which could potentially protect against losses. Let’s take a closer look at forex trading.

What Is Forex Trading

At its core, forex trading refers to the exchange of currencies. Networks of buyers and sellers form the forex market. They can trade currencies at agreed prices.

The market is quite volatile which means that prices change constantly. The fluctuations are affected by demand and supply.

Forex markets are global and are open for 24hrs on Mondays through Fridays. The market is not controlled or run by a single organization. Instead of central exchange, a network of financial institutions oversees the forex market. Forex trades are normally conducted over the counter (OTC).

Types Of Forex Traders

There are many types of investors in the forex market ranging from institutions to individual traders. Some of the major institutions and traders include;

  1. Central Banks

They play a huge role in stabilizing and growing a nation’s economy. Generally, they manage their nation’s money supply, currency, and interest rates. There are many steps they can take to make the national currency more competitive in the forex market.

  1. Commercial Banks

They create the greatest volume of currency trade. Their trades are usually done on the interbank market where they make transactions on behalf of their accounts or larger organizations. They often facilitate forex transactions making trading simpler for their clients. These trades are usually speculative to make a profit.

  1. Investment Managers

These are the second largest group of forex investors. The group is large because it contains not only investment managers but also hedge funds and pooled funds. This is where currencies are traded for large groups such as pension plans or foundations. Investment managers commonly make speculative trades.

  1. Multinational Corporations

When an organization is involved in international trade, forex trade becomes an essential instrument. Through forex transactions, they can receive payment and even pay for services or goods easily.

Many companies opt to trade forex to hedge against future price movements within the market. This creates a sense of safety for companies while trading in a volatile market.

  1. Individual Investors

Individuals can become part of the forex market through retail trades. They are the smallest group of investors in the forex market but it is increasingly becoming popular. Fundamental and technical analysis are factors that retail traders use to trade. They can be combined or used separately. Their main aim is to use speculation on price movement to make profits.

Ways Of Trading Forex

Spot Market – This forms the main currency exchange market. Demand and supply determine the rates of exchange. The rates are determined in real-time because of the volatility of the market. Spot markets involve the exchange of currency pairs. Such transactions occur ‘on the spot’ meaning that they only last a short period.

Forward Market – These kinds of markets trade are based on contracts. Rather than trade in the present, traders agree upon a specific exchange rate and lock it for a future date. Such contracts are usually based on private agreements.

Future Market – These are standardized contracts made on an exchange. Unlike forward markets, they are not private and can be legally binding. Such contracts allow traders to trade at specific exchange rates in the future, despite the direction price movements.

Each technique is unique and may be used by traders based on their specific needs. For example, a trader seeking to make a profit through speculating on prices will make an investment based on predictions on price movements. Traders need to consider what they aim to achieve before selecting a forex market.

Wrapping It Up

The forex market is the largest in the world. It is popular for many reasons and it also has many benefits. Even though there aren’t many retail traders, individuals may invest in the forex market. Selecting a market should be based on what an investor aims to achieve rather than popularity. However, any novice should take the time to gain some understanding of how forex trading works.