Trading is based on buying and selling financial assets or opening positions on them using their price fluctuations. This method is key for those who are not satisfied with their savings and seek additional benefits. This is a tempting financial method because the returns can be high, but you must remember that the risk is also high. This requires analysis and experience and, above all, an attempt to figure out the risk profile that a person is willing to go through in order to determine if he is able to withstand the pressure that this entails.
The trader himself seeks to determine whether the price will go up or down. in a certain period of time and acts on the basis of its analysis, which takes into account statistics and trends in order to know when to win or not. In addition, based on the specific market situation in the short term, it considers various financial products, unlike the traditional way of investing, which only considers stocks.
Another difference is related to time, as trading uses very short periods of time, measured in days, hours or minutes, which allows you to profit from price differences. Thus, it is about buying and selling in a short time, based on the price of financial assets such as gold or raw materials.
Experts agree on five well-known benefits of working with this modality:
Accessible. Technological democratization has enabled millions of people to access financial markets through a variety of tools. In terms of trading, there are many online platforms that allow you to access these markets through brokers regulated by international and local organizations. Most of these brokers, such as the online trading platform AvaTrade, offer investors accounts with a very affordable minimum deposit to start trading, which expands the number of investors.
Another aspect related to accessibility is that the Internet has provided users with a wealth of information on how to manage and trade different types of assets.
Variety and versatility. It offers a wide range of investment instruments. The economy is not static, it has variables, which means that at certain times the prices of some sectors are more convenient than others and trading allows you to seize the moment.
It also offers versatility as you can invest in currencies, stocks, indices, commodities, cryptocurrencies, derivatives and futures, among others. This range of options allows the trader to take positions where they think they can make the most profit.
Use. This makes it possible to invest money in smaller amounts, and the broker puts the difference. In this way, the funds to invest are multiplied, as well as the trader’s profit. However, these leveraged products pose a lot of risk because the downside of big profits is the possibility of losing your initial deposit entirely.
Freedom. The beginnings of a trader are not easy, but when he reaches a certain degree of maturity, as a result of successes and mistakes, he can become his own boss and achieve financial freedom.
Low costs. Entry costs are low as traded values arise from the difference between the bid and ask prices.
Among the skills that a trader must have in order to achieve their goals, experts note the ability to perform technical analysis of statistics and charts to optimize profits and reduce risks. It is very important to have systems thinking in order to maintain a logical order of decision-making, where to act, as well as the constant responsible risk management.
They also emphasize the use of emotional control techniques to keep anger and euphoria in check and keep emotions from controlling decisions. Since trading is a dizzying dynamic, and allows you to work in a very short time, you need to have dexterity and flexibility in developing processes. Similarly, every trader who suffers does so by learning from his history of losing investments. Therefore, resilience to loss and adapting to change to change strategy will be essential to survival in the profession.
Studies in Brazil and Taiwan, which are a clear indicator of the growth of trade, but also of its difficulties, show that 40% of investors leave within the first month, 80% stop working within the first two years; while if we’re talking about survivors, 13% make it to three years and only 7% make it to five years in the trade, proof that while profits can be high, few are able to withstand the pressure.
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