October 22, 2021

What is trading – a complete overview of the concept and main stages of trading

9 min read
What is trading - a complete overview of the concept and main stages of trading

What is trading and what are its types? What are the features of social and pair trading? What you need to know about the psychology of trading for successful trading?

1. What is trading?

You definitely have a superficial understanding of trading. But in order to understand the essence of this method of earning correctly, superficial concepts are not enough, need to dig deep.

There is a certain substance called «Financial market». It is divided into currency, urgent, stock, commodity, raw and so on.

There is a market buyers and sellers – large market crowd. Some sell something, others buy. «Something» called a financial instrument (security paper, currency, oil, cotton and t. P.).

Financial instruments constantly changing in price. Oscillations do not stop a day, not at night (I draw your attention here, I will explain the reason below). Hence, rising and falling prices – good earning opportunity.

Example

If i bought thousand bitcoins in November 2011, when the cryptocurrency price fluctuated between 2 and 3 dollars, and sold today, when one bitcoin is worth $2800, would turn 2-3 thousand. in $2 800 000 dollars or more.

Gold, by the way, is worth 1265 dollars. Cryptocurrency is not provided with anything, it’s a soap bubble, which all swells and swells. Can, he will burst soon.

Trading is called the process of making money in the financial market. Its essence – buy cheaper and sell more expensive.

What you need to make money on trading? Be able to enter the market correctly — open a deal on time and exit correctly — close at the right time.

Most traders (80%, if not more) enters the market based on intuition and emotions. Basically, it’s good, because big players earn on such losers – small fish itself goes into the mouth of a shark.

If we want to make money on trading, then intuition should turn off, emotions – all the more. For success, we need to be able to understand the tactics of the game professionals and do the same, what they. I.e. swim, like a pilot fish for a big shark, and enrich.

You need a computer to trade, Internet and trading terminal. Unfortunately, faces of major players we will not see, they will not share their opinions with us. The only opportunity to attach to them and not miss «gourmet» — reveal the idea of ​​a professional based on analytics.

There is fundamental analytics – look, what is the state of the economy, eg, The European Union, and conclude, euro will rise in price or weaken. Recently, a second scenario has been observed:

This is a monthly chart – the euro has been falling since July 2008
This is a monthly chart – the euro has been falling since July 2008

In addition to fundamental analytics, there is a technical – not peering into the economy, and in graphics. All deals, opened by traders, affect him, nothing will demonstrate the psychology of a market crowd so vividly, like price history.

«History – it’s a flashlight to the future, which shines for us from the past»

Klyuchevsky

There are many methods of technical analysis: candlestick analysis, indicator readings, trading patterns. I personally just love horizontal levels. Sometimes amazed just, how the market feels them:

Today, speculators trade either on the stock exchange, on either Forex trading. I like the last option more, for the foreign exchange market has a number of advantages. In order not to repeat, I recommend that you look into the materials «What is inbargain market» and «Stock exchange trading».

What direction to choose for analytics, to squeeze out a lot of money from the exchange? What are the trading styles and how does the woman mentioned above trade? More about this below.

2. What are the types of trading — TOP 7 main types

Compare the most popular trading strategies.

And for forex, and for the stock market they are the same.

View 1. Scalping

Feel the connection with the word «scalp»? And right! Scalping – it is literally «scalping» from each price movement. Opened a deal, appeared a little profit – shut down.

If you wait for this «a little bit» on the weekly chart, you won’t make big money, therefore scalpers catch price jerks on minute and five minute time frames. This style has a lot of strategies, but we’ll talk about them in another article.

If you decide to be implemented as a short-term trader, get ready for stress: prices on minute timeframes jerk very intensely, and they’ll tickle your nerves oh oh.

Kush, true, not small: scalpers earn more than all other traders, when they become true professionals.

View 2. Medium-term trading

On the Forex trading medium-term trading means trading on timeframes «1 hour», «4 hours», «Day».

It is recommended that all beginners accept baptism of fire precisely in medium-term trading. One must learn to control emotions, «see» market movements and their wave nature, correctly place trade orders and t. P.

Scalping beckons fast money, but doesn’t teach self-control at all, and without a trained will in speculation, nowhere.

View 3. Long term trading

Long term – all time intervals, exceeding one day. This is usually a week, for then follows the month, and wait for profit/for months, traders do not like loss, except the largest sharks, such as investment funds, central banks.

Proponents of technical analysis rarely get carried away: large timeframes are ruled by fundamental analytics. With a deep understanding of the economy, long-term investment in the market brings crazy interest with minimal risk.

View 4. Instant trading

Title «moment trading» rare, because the view implies the choice of any timeframe. The point is – I analyze the dynamics of the exchange rate on different timeframes, I find profitable opportunities on several of them and open deals.

Let’s say, I noticed promising signals for five minutes, daily and weekly timeframes for the pair EUR/USD. I open three deals – «seize the moment». I work and as a scalper, medium and long term. Generally, my style is called «moment trading».

View 5. Technical trading

Everything is simple here: trading at any time intervals based on technical analytics. Although, there is some framework – as already written above, weekly and more «senior» timeframes rarely apply here.

View 6. Fundamental trading

Reverse option – fundamental analysis trading. Fundamental trading is carried out on small time frames only when trading on the news. Beginners study all these areas in the framework of trading training.

View 7. Swing trading

Swing trading – this is trading in an uptrend from support levels. If levels are used, mean, there is a kind of technical trading.

The speculator’s task: reveal a trend, determine support and resistance levels (horizontal and trend), open a position from support. If the price rises – only for purchase, if falls – for sale only, i.e. trending.

Everything, sorted out the views. There are a lot of classifications, with in-depth familiarity with trade, you can easily master them.

3. How is trading — 7 milestones

And to get acquainted with trade in depth, follow the plan.

Briefly highlight those steps of the stairs, which you will go to a successful stock exchange game.

Stage 1. Choosing a dealing center

Dealing Center – same, as a broker – face, executing your trading orders on the exchange. To choose the right intermediary, need to analyze trading conditions, technical equipment, company reviews and more.

Stage 2. Opening and replenishment of a trading account

When DC is selected – open a trading account and replenish it for a certain amount. Some companies require passport data to activate an account – don’t be afraid to send, if the company is reliable.

The amount of replenishment depends solely on the preferences of the broker.

Stage 3. Gaining access to transactions

When an account is open, access to trade is turned on automatically – analyze the market, open deals, get your first profit.

Stage 4. Installation of specialized software

Deals open through the trading terminal, which is installed on the computer.

Newly Found Brokers, trying to overtake seasoned competitors, tout their «unique» BY, but if they came up with something really more worthwhile, than MT4, industry giants would instantly abandon it. So far, everyone remains true to tradition.

Installation is simple, programs do not take up much space.

Stage 5. Studying price dynamics information

Before opening any transaction need to analyze the market. Choose your path of technical or fundamental analysis (maybe, and that, and another), delve into market processes and move on to the stock market game.

By the way, the story in any terminal is not endless. For a complete vision of price dynamics, it is often necessary complete history of market movements.

Stage 6. Formation of requests for a transaction of purchase and sale of currency

Request Formation – in other words, opening a trading position or order. It takes two clicks: click on «New order» and press «Buy» or «To sell».

Although no, not two: do not forget to indicate the position volume — exactly how many units of currency do you buy, issue protective orders.

Orders are divided into two groups. A market order opens at that price, which is currently on the market. The deferred will open then, when the price reaches a certain value.

In the table below, I briefly characterize pending orders – take note. Not now, so in the future you will understand its importance.

Pending orders

Type of order Characteristic
1 Buy Limit Bounce order. Installed then, when a U-turn is planned after reaching a certain level. Price falls first, then touches the desired level and unfolds. Course starts to grow, we earn.
2 Sell Limit Bounce order. Price rises first, then falls, we earn on recession.
3 Buy Stop Break Order. Used in news trading, when the market starts a sharp movement and opens a pending position to increase.
4 Sell Stop Break Order. Used in news trading when the market moves down.

Your deal is now on the market, the terminal displays profit and loss on it.

Stage 7. Fixing transaction results on a trading account

When a trader understands, what time to leave the market, he closes a trading position. true, not always myself.

The transaction is closed with profit or loss in three cases:

  1. The trader closes the deal himself.
  2. The price reaches a level «Take Profit» (hence, trade made a profit) or «Stop Loss» — loss recorded.
  3. The broker automatically closes the transaction due to lack of funds in the trader’s account – Stop out.

I will focus on the last option. If you opened a big deal and almost the entire deposit went negative, broker can automatically close your position, for he does not want to borrow.

The level of Stop Out in different companies is different, usually it is approximately 80%.

4. How to succeed in trading — 4 useful tips for a novice trader

It seems to all newcomers, that for successful trading on the market you need to know some chips, secrets, much to analyze. They think, that a professional trader’s currency chart is always crammed with indicators and t. P.

«The market is a very simple thing» — a familiar professional trader once told me. It’s not so much about trade secrets, how much self-control, not give in to emotions. If you have good self control – success will come unambiguously.

So, excerpt – the main thing. Plus 4 more recommendations.

Tip 1. Prepare a good theoretical base and learn the rules of trade

I mean basic training, understanding of the essence of market movements. Price – this crowd behavior – understand, where does the crowd seek – always be with the money.

The rules of trade should be clearly stated by your strategy – when to enter the market, when to go out, pull protective orders or not to touch them and so on.

Tip 2. Know how to plan

For each market situation, you should have a step-by-step plan. How do you behave when the price rises, at its decrease, will you close, if flat starts. Think about your plans, be aware, why do you do that, not otherwise.

Tip 3. Understand the nuances of the exchange

Amateurs lose money on gaps after the weekend, do not open on time due to slippage, take off on Stop Out – can infinitely enumerate, because really a lot of nuances. Sort them out.

Tip 4. Keep records and record your mistakes

Desirable analyze every trade in a trade journal – get a thick notebook and paste the printed graphics, mark your deals on them.

Useful to fix, besides the results, also emotions. After a year or two of constant trading, you will understand, how important is it.