Train to Trade is it Necessary ?

Most people would be attracted to the idea of earning extra money in their spare time or of making their living from home or even on the move. One approach to achieving this dream is to trade financial markets successfully.

The people that try this will either have had some market experience and think they can transfer what they know to trading or will be people who have no market experience but attend a taster course and, perhaps, think that they now know enough.  Both could be dangerous to their wealth and they need to be dissuaded from moving ahead without more information and, in particular, training.

Trading the markets is a completely different approach to making money than investing for the medium to longer term and participants will require knowledge of the best approach to avoid the potential pitfalls.

Financial markets are ideal for trading as they are very dynamic and volatile and are very liquid.  Thus giving opportunity to pick up on trends without, usually, being caught out by a single market participant.  The most suitable in this regard is the foreign exchange (or forex or fx) market.  This market is global, is open 24 hours per day except weekends and is very liquid with approximately $5 trillion dollars traded every day.  It is, however, a market in which money can be made very easily but, for the untrained, can be lost even more easily.

Trading the forex market can be done by buying the physical currency with either your own funds or with money borrowed.  This requires more sophistication than most people would have.  It also requires the access to large sums of money and exposes the smaller investor to high transaction costs.  Most people who trade the forex market will do so by trading using a margin account through spread betting.  This is cheap, tax free and requires much smaller amounts of money than might otherwise be needed.  It does, however, open the untrained trader up to large losses as trading on margin gives the trader the opportunity to enjoy unlimited gains but to also suffer unlimited losses with their account being wiped out in very short order.

That is scary stuff but the trained trader will know not only the best time to enter and exit a trade but will also learn how to limit their potential losses on each trade.

Knowing the techniques for spotting a potential trade involves reading charts, being aware of any relevant news that could have the potential to move prices for or against the trader at that time.  Reading the charts is more than just buying low and selling high although that is one objective.  The trader can also sell high and buy low thus taking advantage of rising and falling markets so that they make money in either.  When is a currency low enough to buy and when is it high enough to sell? The techniques learned will help pin point the optimal time to buy and to sell. Nobody wants to buy at the top and sell at the bottom.

 

Another problem is that the techniques learned for buying or selling only gives the trader an indication that this is the right time. Not every trade will automatically succeed, indeed most traders will experience more losing trades than profitable trades.  So, you might ask, how can they make money?  The answer is to recognise quickly when a trade is going wrong and to limit the losses experienced to small amounts whilst running profitable trades for as long as is possible to maximise the profits.  Traders will enter a position knowing the potential loss and the potential profit before they click the buy or sell button.  The techniques needed for this can be taught by existing successful traders.

Another consideration has to be how to maintain the original funds intact while suffering early losses and waiting for that big and encouraging successful trade. The obvious starting point is to have sufficient funds as working capital to tide one over the early trades while a rhythm and profitable trend can be found and worked on. The untrained trader may well be carried away with the prospects of making their fortune quickly and retiring early to a Caribbean island.  That ‘certain’ trade will do it for them or maybe the next one if the first fails or maybe the next one.  This may well lead to no funds left before the first successful trade can be found, desolation and a very disillusioned trader.  The ‘trained’ trader will know, however, how to avoid this simple and all too often found mistake.  Trading involves hard work and dedication and the application of the correctly taught techniques.

Trading can be a very emotional pastime.  It is your money and the trader needs to ensure that it is money he is prepared to lose and which he can manage without should that happen.  Even though this may be the case, the trader will find it a very emotional activity the euphoria of making profits can all too easily be countered by the depression of losing.  Traders need to be prepared to lose and should plan their trades so that they know what they might lose and what they can expect to make.  The psychology of trading is very important for all traders to understand, This will include planning the trade and limiting the risk but it also includes knowing themselves and being aware of the pitfalls such as doubling up on a losing trade that one ‘knows’ will come good.

As with all worthwhile ventures being prepared before you starts is paramount.  That includes knowing you have the time and the funds and the desire but, perhaps most important is the need to be properly and professionally trained by a well tried and trusted professional training company.  The prospective trader should be reassured as to these attributes by attending taster courses and by meeting the traders that the company have and which have already found success.  These traders should be prepared to give of their time and their advice on an ongoing basis to help others on to this lucrative and satisfying route to making a very good living.

Darren Winters