This article will be an introduction for those who want to enter the world of trading, especially in this period when learning to trade is easier than ever, with the emergence of technology and e-commerce developments that provide ordinary people with an opportunity to enter the financial markets. The emergence of trading and trading programs and platforms. So let's learn to trade easily in the following lines.
What is the concept of trade?
Most of us are constantly trading in our daily lives, even though we don't even realize we are. For example, everything we buy in stores is a form of trading with money in exchange for the goods or services we buy, and thus the concept of commerce can be simplified to define exchanging one thing for another.
Usually, when the term commerce is referred to as a verb, we are directly aware that a good or thing is being exchanged for money, or in other words, the buying of something from one person and selling it to another person.
Trading is generally based on supply and demand, as the value of what a person or group of people is willing to buy varies depending on the change in supply and demand and the rise in demand for the commodity or financial asset.
This means that a large number of people are willing to pay for its acquisition, and therefore an increase in the demand for a commodity will cause its price or its price to rise due to a large number of needs.
On the other hand, a higher supply of a commodity means that there are no purchase orders for it, or that the quantity supplied is greater than the required volume, which may cause its price to fall. Attract customers to buy.
We study the following example together to understand the topic more clearly:
Assuming you're in the auto market - that is, buying cars, which is a commodity where - you want to buy for the money and a particular model that can only be found in the store. The model, if you're the only buyer in the store, you can probably get it. It's a reasonable price.
But if many buyers are willing to buy the same model, it means that competition arises among them to get it, in which case the dealer is expected to raise the price because many people are willing to pay. For this, to explain simply, “High demand—the desire to have—causes higher prices,” which is the first principle of the concept of commerce.
On the other hand, suppose there are 10 cars of this model that you want to buy in the store and there are only two buyers, then the store is expected to lower the price of the car to attract more buyers. The move is an affirmation of the second principle that trade "causes the supply - or supply - of a commodity to fall in price".
Thus, the above can be summarized by saying that the process of trading works by exchanging one thing for another of equal value, and this value is determined by the power of supply and demand for that thing, and the process of trading has developed over the ages.
There was a different price in each era to get the same thing, from bartering for another good to exchange it for gold or other metals, and eventually to exchanging goods for money in different forms (cash, credit, electronic or digital).
Skills required before learning a trade
Once you know the concept of trading and what it is, you should know that trading is not limited to day trading and swaps.
In the presence of different financial markets, trading is not limited to commercial transactions, but trading turns into a profession, and its concepts alternate between speculation and investment.
We should not forget that business success is not an accident, it requires more training, trial and error, and great effort in continuous development, perhaps for long days.
Below we review the most important features of the merchant
1. The ability to constantly learn and experiment
You must be excited to turn the learning and basics trade into something fun.
Trade is like any other profession or craft you have to learn and you don't just need to steal some things but you have to fully understand and know the details, markets are dynamic, constantly changing, and influenced by many factors and external news, there is something new every day.
Your learning process should also be fun so that you can make full use of what you are learning.
Most traders succeed when they learn from their past mistakes and do not repeat them, because the only way things will end is to learn from past mistakes and avoid them.
Always remember that you cannot beat the market and take revenge on it or its stubbornness.
Some traders give themselves too much confidence to the point of arrogance, which leads to strong successes that lead to higher risk and ultimately higher losses, and they also do not seek revenge when they incur losses in the market. Or the stubbornness of market movements.
Allow yourself to understand the reason for the loss so that you can avoid it on the next trade and thus achieve success.
2. Risk Management Before Taking Profits:
Risk is an important part of the trading process, and accepting risks, understanding their causes, and focusing on managing them are one of the most important factors of success in managing your trades or trades.
But most novice and inexperienced traders focus only on profits based on the idea that trading is a way to win quickly without managing risk, exposing them to huge losses and forgetting the principle of “the most risk”, forgetting the monthly rule. It never means that your risk increases greed, as profits increase, trading will turn into gambling, but start focusing on protecting what you have and at the same time give yourself a chance to win.
3. Discipline and patience
Patience and imagination are qualities that a successful trader has always had, and this is what allows him to make the right investment decisions without haste.
No successful strategy or approach always works and brings profit, the main thing for success in trading is discipline no matter how you invest it, discipline to prepare and implement the trading plan as needed and what will achieve your goals. A business process that leads to profit.
4. Objectivity about the market
It is characteristic of a successful trader that he views the market from a realistic and objective point of view, and accordingly, he can make accurate forecasts that are closer to reality.
In addition to getting to know all the information you need to create a clearer picture of what you are thinking of trading, the trader must be organized and firm in making decisions that help organize your investments and know the success rate of each trade. It can also track failure and success rates related to total capital.
About trading in the financial markets
We can trade in different financial markets with the same principle that we trade in different commodity markets in our daily life, but before explaining the principle of trading in financial markets.
Capital markets, including the stock market and bond market: For example, when we apply the principle of trading in the stock market, trading is the purchase of a share or a small part of a company for a certain amount of money, and if the value of these shares increases and they are sold once Others at a higher price for the money.
In short, this is buying something at one price and selling it again at another in the hope that the selling price will be higher to make a profit.
Forex market
The idea of trading applies in the foreign exchange market, where one currency is exchanged for another, and if the price of the purchased currency increases, the trader can make a profit by reselling it at a higher price, and vice versa.
Here too we apply the principle of trading which is to buy a currency at a certain price and then sell it at a different price in the hope that the price will go up.
Trading in the foreign exchange market is a little different from the rest of the financial markets because of the mechanism by which it works, the trading system or what is known as the pairs system, which is somewhat similar to the barter system - as we have already told you about what is the forex and the parity system in the foreign exchange market.
commodity market
In the commodity market, which includes important commodities such as wheat, sugar, cocoa, gold, and oil, commodities are bought and sold in the form of spot, forward, or forward contracts. Selling a commodity contract in the hope that its price will rise in the future or fall in its price in the future, is known as commodity speculative trading through CFDs.
Cryptocurrency or cryptocurrency market
The principle of trading in the cryptocurrency market, such as the foreign exchange market or the commodity market, is carried out by buying a certain digital currency for an amount of money, and the trader can make a transaction if the price of the purchased digital currency or cryptocurrency increases. Make a profit by reselling at a higher price and vice versa.
Before deciding to trade in the different financial markets, the trader must know the basics of trading in general, what each market is, and how to deal with it, to develop successful strategies that facilitate the process of trading in these markets.
What is the difference between trade and investment?
Trading or speculating and investing may be similar in the basic idea of both of them; It risks excess or saved money to earn a return.
But although both the investor and the trader try to make profits by trading in different financial markets, there is a difference between investing and trading in the financial markets, which makes each a different approach.
The difference between the two can be summarized as investing is the use of some money to earn a return over long periods, while trading usually aims to buy at a low price and sell when it is at an elevated price.
In addition to being able to earn a return on dividends, such as shares or interest, without having to sell shares or bonds.
On the other hand, the trader takes advantage of the ups and downs of the markets by buying and selling for a shorter period and making fewer but more frequent profits.
Trade and investment can be distinguished by 5 factors:
1. Time Range
Investors invest their money for relatively long periods, and often short-term market price fluctuations or movements are not so important for a long-term investment, unlike a trader who is looking for short-term and recurring profits.
2. How to make a profit
The trader looks at the upward or downward movement of stock prices in the market and the trader can take advantage of the rising or falling prices of different stocks or assets. While the investor seeks to achieve cumulative profit by holding high-quality shares and assets in the market and doubling the benefits and profits within a few years.
3. Risk ratio
Both trading and investing involve risk to your capital, but trading has a relatively higher risk-to-high reward ratio due to daily market volatility, short-term declines, and higher prices. Investing takes time to develop and has lower risks and returns than trading, but can generate higher returns through accumulating interest and profits if held for a longer time because it is not affected by daily market fluctuations.
4. Minimum Allocated Capital
Or the so-called initial account opening balance, usually the money allocated for investing is more than trading, so we can see that stock brokerages may require accounts starting from $5000 to start trading or investing in stocks, and the minimum to open an account for forex brokers is only 200.
5. The time allotted for the trading or investment process
And we mean the time a trader spends tracking, analyzing, and selecting trades, unlike investing, trading requires more follow-up time, maybe not for long periods, but despite its short it is common.
This is due to daily tracking, which can be multiplied during the day and can take at least 2 hours per day in the time of the trader. As for the long-term investment, it requires less time, it may be limited to a few hours a week or a month just to search for investments and identify suitable opportunities that fit with the specific strategy, and maybe after a few minutes to continue.
Learn how to trade more easily with e-commerce
The spread of the idea of e-commerce is due to the development and spread of the Internet, with high-performance computers and smartphones beginning in the current century.
Online trading has increased significantly, especially due to the increasing dependence of the global economy on financial assets such as stocks and others, as well as the emergence and spread of systems for trading financial assets through various means of communication or known as the OTC system.
E-commerce is not different from the exchange of anything in our daily lives, except that it takes place over the Internet and is governed by the laws of traditional commerce pushed by the rule of supply and demand.
Electronic trading is the exchange of financial assets through trading platforms or programs, such as trading currency pairs, stocks, commodities, and digital currencies, to take advantage of changes in the prices of these assets through trading platforms offered by brokerage firms. expected direction.
One of the main advantages of electronic trading, for many trading brokers offering online trading platforms, is the opportunity to enable more investors or traders to track, execute and execute trades themselves, compared to traditional trading that requires a presence in the market. Market Center.
One of the most famous examples of such platforms is the MetaTrader 4 platform, which is used for trading currency pairs, trading stocks, and indices, as well as commodities, and cryptocurrencies.
Tips before entering the world of trading
It should be noted that day trading is not as easy and convenient as it may seem at first glance and is not seen as a quick profit method as some think.
Despite the difficulties that traders face daily, some people take day trading as part-time and sometimes full-time work, so the following tips should be followed to get the desired profit from spending time in day trading:
Learn the basics of trading
Science and knowledge are the weapons of the trader, and before entering the world of trading, the individual must first understand the nature of the market that illuminates dealing with it, know the sources of its news and data, and how to deal with it. And how to take advantage of it.
Then he moves on to learning the basics of trading, the mechanism of action, and the method of application in the various financial markets, and then experience, which is one of the most important elements that will determine the degree of understanding of what he has learned and learned. . The ability to enter the trade area correctly.
First, identify risks and challenges
Trading, speculation, or investing involves risks, and profit from trading depends on the trader’s ability to identify risks, deal with them and manage his capital properly, so accepting the idea of risk and looking for ways to deal with it is the first way to success in the markets
Second: commerce depends to a large extent on the psychology of the stores themselves.
You are trading with a financial instrument that you can see and understand, take what suits your nature and vision, constantly improve your technique, understand its movements, follow its news, risk trading on it,
Note that you cannot trade alone. Study, observe and discuss the analysis of others and learn about different sources to make your point of view more general and inclusive, but share your point of view and deliberate on what you see and understand.
Third: Dealing with more money than you need
It takes some time to get a fairly consistent return from the trading process, so it is very risky to start the trading process with a large number of deductions from your expenses or basic expenses.
Since this puts a huge psychological burden on you in the trading process that can affect your decisions and you should know that one of the basics of managing the risks associated with day trading is to use money that you do not have to worry about losing and this is the concept of accepting risk, so we always advise you to start trading with large amounts of money. Little firsthand experience in dealing with the markets
Fourth, develop a plan and strategy for trade and capital management
To develop a successful trading plan and strategy in the foreign exchange market, it must be in line with the nature of the personality of the trader and the goals of entering the market, and the plan must be clear, realistic, and executable by the trader himself.
Remember that trading is a business and preparing a trading plan or strategy is a feasibility study for that business.
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Forex trading