Trading Concepts You Should Know

Trading Concepts

Introduction

Trading involves buying or selling financial instruments for potential profits or losses. There are millions of lots traded each day in the markets, which provides enough volatility and liquidity for investors. While it is considered hard to make a living out of it, understanding some important concepts can help you become consistently profitable quickly. Our article will cover all the vital terminologies in trading and how traders can use them to reach their goals with ease. 

Important Terminologies

Let us list a few vital terminologies that are part and parcel of the financial community.

Broker

A broker allows traders to place their executions easily by having access to the market. Brokerages connect themselves with exchanges and list the quotes of respective instruments that investors can look at on the platform and trade. The trading conditions, such as spread, minimum deposit, execution speed, etc., can vary from one broker to another. Using an online broker, traders can trade from the comfort of their homes. Xtrade offers some of the best conditions in the market and is regulated by one of the top-tier authorities.

Regulation

Financial regulation ensures that traders are not double-crossed while trading. Regulators keep a check and balance on the brokers and impose heavy fines if they believe the company is not fulfilling its duties to investors. Below is the list of some of the noted regulators in the market.

  1. Cyprus Exchange and Securities Commission CySec
  2. Australian Securities and Investment Commission ASIC
  3. National Futures Association NFA and Commodity Futures Trading Commission CFTC
  4. Financial Conduct Authority FCA

Instruments

Financial instruments are products that can be traded on an online broker. These may include stocks such as Microsoft, Amazon, etc., forex pairs, indices, bonds, etc. With the advancement in technology, it is possible to trade multiple assets within a single brokerage. 

Trading Styles

We can classify traders into three broad categories depending on their trading styles:

  • Swing. These investors hold their positions for the long term. They have a wide stop loss, take profit, and are subjected to swaps on their trades. Fundamental analysis is common here.
  • Day. Day traders get in and out of the trades on the same day or within 24 hours. They may use fundamental and technical analysis on lower time frames, such as the hourly chart.
  • Scalpers. These traders are on 1 or 5-minute charts. They finish their trading in a couple of minutes in a few trades. 

Trading Signals

Professional traders provide trading signals for beginners or amateurs. They charge a fee for that, and doing so helps them earn a passive income in addition to their profits. There are many account management services online that operate through social media channels. Investors should be wary of them as most are looking to scam customers. A true professional maintains transparency on their strategy and records while giving top support for traders.

Software

Trading software is used to send and manage trades. Traders can also analyze the markets and run their algorithms depending on the features. Mobile applications are also available for this purpose. 

Strategy and Risk Management

Using a good trading strategy with proper risk management is a sure way to keep yourself within the 10% of profitable traders. A high losing trade in the market is due to over-leveraging and emotions while trading. 

Scams

Scams run all over the financial markets. A good way to spot them is to ask the person to show verified records. If the service provider promises thousands of dollars, it is better to leave such a place.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.