Introduction to Financial Trading

Have you ever wondered how some people achieve real wealth while others seem to labour every day, hardly keeping their heads above water? Of course, we have all heard the stories of Steve Jobs, Bill Gates, and other entrepreneurs who founded companies that turned out growing exponentially, making them billionaires, but this form of creating wealth is one to which many aspire but few achieve. It is not possible to program yourself to come up with a winning idea or the means to implement it with any certainty.

Many wealthy people have found another way in which it is possible for someone who does not have a genius mentality or the “luck of the Irish” to make large amounts of money. It is the study and practice financial trading in one of its many forms. That is to say, financial trading implemented and used wisely is a way in which ordinary people can make more money than is achievable by simply working a job.

 

Introduction to Financial Trading

You might wonder why this is not done by everyone, if it is so readily available. The answer is that you have to devote time and effort to studying the process and learning how to do it. Too many people nowadays want a “get rich quick” scheme, so they move onto the next big thing as soon as they discover they have to work.

Of course there are risks in financial trading, particularly as the nature of the practice is to make money from someone else losing it. As you will find out, it is more or less a zero-sum game. Fortunately, for those who take the time to learn how to play it properly there is a seemingly endless supply of novices who think they can pick it up quickly, and they bring fresh money into the market. “A fool and his money are soon parted”.

It bears repeating that financial trading can be risky, particularly if you attempt to shortcut the process of learning about it. You have to bring common sense to the markets, and also learn particular aspects peculiar to the trading environment, such as leaving your emotions totally out of the equation.

Whatever type of trading you do, the chances are that your broker or dealer will allow you to have what is called a “demo account”, a practice account that allocates you pretend money so you can try to increase the account without risking a penny. It is highly recommended that you take full advantage of this facility, so that you can become confident that you fully understand how the operation works and the ways in which you can pick a winner before you risk any real money.

Trading encompasses several different types of market. Perhaps the most obvious one is the stock market, where participants buy and sell shares in different companies and the prices are constantly changing. Another well-known trading environment is the foreign exchange market, also known as Forex or FX, where you try to make money by anticipating how currencies will vary in their relative values. The third market you may have heard of is the commodity market, where primary products in various market sectors such as energy, agriculture, and precious metals are bought and sold.

There are many different ways that you can take part in trading, and you are certainly not limited to simply buying and selling stocks, oil, grain, or any of the other items on sale. You will find out that there are various ways to increase the effectiveness of your trading using what are generally termed “derivatives”, that is financial “instruments” that derive their value from something else. This means that with a small stake you stand the chance of large gains. Usually this multiplication factor also works in reverse, so that you can stand to lose a lot, and perhaps more than the amount of funds in your account.

This is precisely why you need to approach the issue of financial trading in a sensible manner, learning all you can and applying the correct principles. There are tools which you can use to help you make the right selections, and these fall under the headings of technical analysis and fundamental analysis. With  a knowledge of analysis and the use of computers you can learn a lot about how prices should move, and therefore come out ahead.


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