Congratulations on taking the bold step to become a trader!
Trading (whether in stocks, real estate, or other high-value commodities) is one of the few legitimate ways to build wealth fast. However, you’ll require a great deal of resilience to rise to the ranks of renowned billionaire traders like George Soros and Bill Lipschutz.
From highly volatile markets to elaborate trading scams, new traders often have to contend with multiple frustrating setbacks before finding their footing in the industry. Having a robust investment strategy is the only way to ensure your trading career takes off with minimal headwinds, much like how a pro forma invoice receipt template provides a clear structure to keep business transactions on track.
In this post, we unpack the most effective trading techniques that every investor should know.
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Getting Started On Your Trading Journey
The first step in drafting a solid trading strategy is to choose your preferred investment vehicle. Fortunately, there are multiple options at your disposal.
Experts recommend selecting an investment product depending on your budget, investment goals, and risk tolerance. For most investors, the contest often comes down to real estate versus financial markets.
Real estate notably provides hefty returns on investment (ROI), as property values typically appreciate over time. However, venturing into the property market often requires larger initial capital and active management.
If you’re a small-time investor looking for a hands-off way to generate extra income on the side, you might consider purchasing financial market instruments like stocks.
Although subject to considerable price volatilities, stocks guarantee greater liquidity and higher potential short-term returns. The most exciting part about investing in financial markets is their lower maintenance requirements, thanks to the emergence of brokerage companies like RoboForex.
Roboforex.com provides its clients with reliable and up-to-date charts on their trading instruments. Using these charts, you can stay abreast of the latest market news and capitalize on emerging opportunities to generate meaningful profits.
RoboForex traders can pick from over 12,000 trading instruments spread across nine asset classes, with minimum deposits as low as $10. You also enjoy zero deposit fees, minimal withdrawal charges, and a superfast order execution. And for your peace of mind, RoboForex is duly licensed by the Financial Services Commission (FSC).
Narrowing Down Your Investment Options
Even in the realm of financial markets, there are multiple products to invest in. So, it’s best to narrow down your search further before implementing the best trading strategies.
Stocks and bonds can both offer lucrative returns on your investment. However, bonds are more desirable for long-term, risk-averse investors.
If maintaining high liquidity is your primary investment objective, you might want to consider forex trade. And if you’re seeking an investment vehicle that lets you fly under the radar of prying market regulators, then decentralized securities like Bitcoin would suit you best.
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Demystifying Common Trading Jargon
Understanding several trading jargon is a critical part of launching a successful investment campaign. Common trading terminologies include;
1. Market Order
A market order is an instruction to immediately execute the purchase or sale of a security when it hits the best available price.
2. Limit Order
A limit order is an instruction to execute a trade upon satisfying specific conditions. For instance, you may set a buy-limit order depending on the maximum price you’re willing to pay for a security.
3. Spread
Spread is the difference between a bid price and ask price.
4. Pip
Commonly used in forex trading, a pip (percentage in point) measures the smallest price movement recorded in a currency pair.
5. Support and Resistance
Support is the lowest price that security can fall to before it bounces back, while resistance is the highest price the asset can rise to before it starts to reverse downwards.
6. Leverage and Margin
Leverage refers to borrowed money that investment brokers provide, representing a potential for both gains and risks. Meanwhile, margins refer to the minimum funds you must deposit to maintain a leveraged position.
7. Stop Loss and Take Profit
A stop loss and take profit are both orders to execute the close of a trade. The difference is that stop losses minimize potential losses while taking profits maximizes potential profits.
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Exploring Diverse Trading Strategies
1. Momentum Trading
Momentum trading is whereby investors seek to exploit the current upward or downward momentum in a security’s price.
The underlying principle is that the asset in question will maintain its current trajectory for a while, potentially resulting in significant gains or losses.
2. Trend Trading
Trend trading follows the same fundamental principle as momentum trading – capitalizing on an asset’s persistence in a particular direction.
But while momentum trading focuses on price movements within a short period, trend trading emphasizes the general market direction for one or several interconnected investments.
3. News Trading
Market dynamics are highly contingent upon major news events. For instance, stock indices surged tremendously in November 2024 across the United States following the decisive electoral victory by President Donald Trump.
While news traders often rely on economic and geopolitical developments, unrelated factors like impending natural disasters should also inspire trading decisions.
4. Range Trading
In range trading, traders seek out optimal price entry and exit points for markets that fluctuate consistently between two price margins. The idea is to make a trade when the pips are lowest.
Assume that the USD/EUR exchange rate gravitates between 0.950 and 0.960. In that case, a forex trader seeking to dispose of their USD holdings for Euros may opt to close their position when the exchange rate stands at USD/EUR: 1/0.959.
5. Day Trading
Day trading involves opening and closing positions during one trading day. It’s an ingenious strategy to profit from transient price movements during the day while guarding against risks occasioned by unpredictable events overnight.
Contrary to common misconception, day trading doesn’t involve opening positions at the commencement of a trading day and closing them at the conclusion of that day. Traders can execute buy and sell orders within hours or even minutes, provided that they do so within a single trading day.
6. Position Trading
Risk-tolerant traders with long-term investment goals often prefer position trading, a strategy that involves maintaining your holdings until the market dynamics shift in your favor.
A popular type of position holding used in the cryptocurrency industry is known as HODLing, or holding on for dear life. It involves crypto traders holding on to their assets in anticipation of significant positive market shifts.
7. Swing Trading
Swing trading represents a middle ground between day trading and position trading.
In this strategy, traders capitalize on price “swings” within short-to-medium-term price fluctuations to mitigate long-term risks.
8. Mean Reversion
Mean reversion is a principle based on the assumption that assets will eventually revert to their historical averages despite present market volatilities.
The strategy allows traders to invest in below-average securities in anticipation of their eventual rise in prices.
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Final Thoughts
Trading can inspire you into an overnight millionaire or send you plunging deep into debts, depending on your investment strategy.
To master the art of trading, carefully evaluate available investment vehicles. Research each option extensively to uncover potential opportunities and threats, then pick a strategy that aligns with your budget and investment goals.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not reflect those of Geek Vibes Nation. Please consult your own legal, tax and financial advisers about the risks of investment. This article is for educational purposes only.
Amanda Dudley is a lecturer and writer with a Ph.D. in History from Stanford University. After earning her doctorate in 2001, she decided to pursue a fulfilling career in the educational sector. So far, she has made giant strides by working as an essay writer for EssayUSA, where she delivers high-quality academic papers to students who need them.
