There is a clear distinction between trading and investing, although where one ends and the other begins is debatable. The effort that goes into each is different, though. Trading, by definition, is very active, while investing is more passive. The amount of effort put into each betrays the results. Active traders put in more effort and as a result, often see better results. For the skilled trader, this is a good thing since you are rewarded more heavily for your hard work. Everyone has a different preference, and some people like to combine these two methods. Picking just one may or may not be for you.
Major Types of Trading
For the average person, there are really only two types of trading that are easily accessible: binary options and the Forex market. Other assets can be traded short term–like stocks and commodity futures–but to trade these in their traditional marketplaces is something that is too expensive for the common trader to be able to sustain if things don’t go perfectly over the first few trades. With the high degree of variance that’s found in all of these markets over the short term, this would be foolish to count on. Making the most of short term trading could be the difference for you.
How to Approach Trading
You might be a short term trader, but you need to have a long term approach if you are going to be profitable. One or two trades will not make you into a successful trader. But instead, it is hundreds and thousands of trades over many years that translates into a career. You should have this on mind at the beginning of your trading journey. It would be great if you hit a homerun in your first try, but odds are you won’t. Statistics say that you will lose money at first. This can be avoided, though. Good lessons will come out of losses, but make sure you manage the risk involved.
There are two main ways that this is done: education and pacing. By teaching yourself trading techniques and theory, you can give yourself a basis of knowledge for beginning. Many brokers offer demo trading software so that you can practice trade on actual site platforms in real time, which can help reduce losses early on. It’s an easy and free way to teach yourself by doing. This is how most people learn best, so it’s a strong and effective tool to have at your disposal. Most brokers also have other educational tools for you to take advantage of. Market news, daily and weekly updates on what to look out for, economic calendars, and even signals services are becoming commonplace within both the Forex and binary worlds, and this is happening for a reason. They are useful. When you have advanced info offered to you, it is smart to take it.
But theory is not application. You can know all there is to know about trading, but if you can’t use that knowledge when it’s time to perform, its not very helpful for you. Even top traders need to start somewhere, and there is always going to be a learning curve involved. You need to pace yourself so that you are still able to trade once you’ve learned how to actually trade in a profitable manner. Your first trade shouldn’t be with all of your trading cash. Both results could be catastrophic to your career. The first scenario is obvious–you lose all of your money. But doubling your cash early on could also be bad for you. It creates a false sense of security within your abilities. Quick success isn’t a good thing, because even though you are increasing your account size, you are setting yourself up for failure because it makes it easier to believe that these types of risky moves are always successful. They’re not. Instant luck is just that: luck. Luck does not ever make a career and relying on it is a disaster waiting to happen. When it comes to luck you need to be aware of the risk. This is what makes you trade more efficiently.
Everyone has a different style when it comes to trading, and finding your style is the key to success. You can do this on your own through trial and error, or you can get help along the way. Many brokers offer coaching, which can be very valuable. This could be a live person, or you could use an expert advisor (EA). These work through MetaTrader 4’s software as seen here, which connects to your broker, and basically makes all of your trades for you. Either can be extremely profitable for you, and they can even help you to double check your own trades as you learn the ins and outs of trading. Still, it’s something that beginners and professionals can both benefit from.
Finally, realize that this will be a permanently ongoing process. You will never perfect your trading, but you can always be looking for ways to get better. Using tools, such as the ones that brokers provide, can be helpful. It doesn’t matter if you trade Forex, binary options, stocks, or commodities, once you find what works for you, it’s important that you keep refining the process so that your cash keeps growing. Trading is now accessible to the general populace, and that is something that is extremely helpful to you, regardless of your interests.