What trading is all about?

Since the hype of Bitcoin, more and more people are interested in trading and finance. but do you really know what trading is?

Considering all the ads all over the Internet, trading would be a very simple way to make a fortune without too much effort.

Consequently trading is badly perceived because of several scandals. It is also a popular belief that trading is reserved for an elite of mathematicians and accessible only to wealthy people.

So let’s demystify all this!

Trading in its definition is an activity in which a person (a trader) takes positions (buys and sells) in the financial markets in order to make his money work.

It is true that in the past, the world of stock exchange and trading was accessible only to a small minority of people. You had to be physically on the trading floor to place buy  and sell orders. Technology has evolved a lot since then.

Individuals are now able to make investments themselves thanks to trading platforms that are easily accessible today. However, this does not mean that trading has become easy…Far from it!

First of all, what is the stock market?

The stock exchange is a place that allows companies to find money (capital) in order to continue their development.

This is a way to find money more simply and quickly than going through the banks to get a loan. The company sells small parts of its business, these are called shares. In exchange for their shares in the company, the investor gives money to the company, so the investor becomes a shareholder.

The stock market allows the investor to find more interesting opportunities than leaving his money in a bank that offers ridiculous interest rates (0.5 to 2% per year) compared to the potential gains that the stock market could bring.

The investor therefore earns money in two ways.

The first, when the investor buys shares and the price of that share increases, he pockets a capital gain. He will make a profit when he sells his shares once the price of his shares is higher than the purchase price.

The second is dividends. When a company makes profits, it shares those profits with its shareholders, so he receives a portion of the company’s profits in proportion to the number of shares he owns.

The most famous stock exchanges are obviously those of New York, Chicago, London, Paris, Shanghai, Singapore and Sydney.

It is not just the shares that investors can buy or sell. Currencies better known as FOREX allow you to trade on the exchange rates between currencies. Example: EUR-USD, this represents the value of the European currency against the US dollar.

Commodities are also available to traders, so it is possible for a trader to trade (buy or sell) oil, gold, wheat, cotton, natural gas, etc…

Without going into the details of all the financial products available, the goal is to show you that there is an array of financial instruments available to make your money work.

Yes very well…but do you have to be very good at mathematics to understand all this!?

Not at all! For example, the price of a share will evolve in relation to the perception that investors have of that share.

Let me explain.

Let’s take as an example a share that is worth $10. If a majority of investors think that this stock is worth more than 10$, and these same investors start buying this stock, the price will increase. This has nothing to do with mathematics!

The trader’s job is to be able to identify the physiology, analyse the behaviour of other traders who have the most money.

To make it easier to understand.

Let’s imagine that a bottle of wine right now sells for $5, but you know that in a while this bottle will be worth much more! Many other people buy this bottle at $5, because like you, they know that this bottle is worth much more than $5. The more people buy this bottle, the more its price will increase. This is the principle of supply and demand. The math. will not help you in this case.

Okay…but do you need to have a lot of money to start with?

First of all, you have to learn how to trade! Because being a trader is a real job, and like any other profession, you have to train!

Although on the Internet you will find people who tell you that trading is extremely simple…according to them it only takes a few hours of training to become a professional trader!

Becoming a professional trader and having professional results is quite possible, but let’s be realistic! It takes time, just like any other job in the world!

The good news is that learning to trade can be done without having a fortune to start with! You can even start trading without taking out a penny!

Furthermore, you can continue in your current job while learning the skill of trading! The day will come (if you do things seriously) when you can say goodbye to your current job and live solely from your trading activity!

This is quite possible and realistic. I did it, not overnight, but I did it. Trading is the hardest way to make easy money.

The difficult part is to know when and where to make your few clicks on your computer.

All this can be learnt.

You can live from your trading (and live well!), but no you won’t be able to buy a Lamborghini after two weeks of trading.

The goal is not to make the big bang on day one of your trading adventure.

The first step is to train yourself well! Thus, training with people who actually make a living out of trading.

The second step…well, it’s to practise what you’ve learnt!

Then, as you will get better with time you start earning money consistently.

One of the big advantages of trading is that the better you become, the more money you will make.

To sum it up, trading is a serious activity. You have to see it as a business,

Yes, it is possible to make a living from trading. Don’t forget one important thing though, in trading there are a lot of rookies but a few chosen ones.

Do you have what it takes to succeed?