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What Is Spot Market?

The  spot market  can be defined as a stock market, commodities and other assets where perishable and nonperishable goods are bought and sold for cash to be delivered immediately or within a short time interval ( Date Spot ). Contracts that are bought / sold in a spot market are immediately effective ( Spot Contracts ). This market is also known as the “money market” or “physical market”. The purchases are settled in cash at the current prices established by the market ( Spot Price ), instead of using the price at the time of delivery. One of the best examples of a commodity spot market with an asset that is bought and sold in large quantities is the gold market, In which this raw material is bought and sold at the current price for more or less immediate liquidation. On the contrary, an example of a commodity that is bought and sold at the current price (spot price) and is delivered physically later is crude oil. Today the best example of spot market is without a doubt the spot Forex market, which we will describe later.

Currently the term commodity applies to any commodity or commodity that is interchangeable with any other good of its kind. Some examples of commodities are precious metals like gold, silver and platinum, oil, natural gas, grains, meats and electricity. Now the term commodity is used much more widely than before (only applied to raw materials) and includes the technology that has entered this type of markets with commodities such as bandwidth and minutes of mobile telephony. Commodities are standardized and must meet certain requirements to be marketed in the spot market.

The spot market is not a specific location as it does not have a fixed location. It is a distributed market made up of a large variety of large and small participants from all over the world. In some cases, like the Forex, a spot market can have a global reach. Generally, participants in each of these markets share a set of rules and standards that define how to negotiate with each other with the assets and instruments offered by the market. These rules can include the maximum and minimum transaction size for example.

A spot market can be of two types according to your organization:

An organized and centralized market as an exchange dedicated to direct transactions with various assets and financial instruments such as stocks, currencies, commodities and others, which are traded under defined rules and standards and under greater regulations.

An OTC market (Over-The-Counter) , in which transactions are based on contracts made directly between two parties and are not subject to the regulations of a centralized and regulated market as in the case of the stock exchange. The terms of the agreement are agreed between the parties and may or may not be standardized. In addition, it may also happen that the price on the basis of which the negotiation is made is not published. Through the OTC markets, traders can conduct transactions whose terms are tailored to their specific needs, but the risk of default by one of the parties is greater.

In other words, spot markets can operate wherever the infrastructure necessary to carry out transactions exists.

Difference of the spot market with other types of financial markets

The spot market differs from  the futures market  in that the price in the second is affected by the cost of storage and future price movements. In the spot market, prices may be affected by current supply and demand, which tends to make prices more volatile.

Another factor affecting prices in the spot market is whether or not the product is perishable. A non-perishable commodity like gold or silver is sold at a price that accurately reflects future movements in price. By contrast, a perishable commodity such as grains or fruits is directly affected by supply and demand. For example, the price of tomatoes bought in a month of abundance as July will reflect the surplus of this commodity so the price will be lower compared to a month of less abundance as January, during which the demand for Products of this type is increased. Therefore, an investor should not buy tomatoes for delivery in January with July prices,

Understanding Risks In Trading

Normally, experts talk about two types of risks in a trade: the risk in the stop and the risk in the size of the position (or the total risk of its portfolio). However, the reality is that there are many other types of risks. Risks in an operation, especially in the current market circumstances. Below is a list of the most common risks traders face:

  • Default risk in a trading
  • Risk in the size of a position (the total risk determined by the trade and the size of the position)
  • Market risk
  • Risk of the company with which we are investing
  • Psychological risk

Many operators even the most experienced had no idea that there were so many risks to the market in this difficult climate in which it has been for months. Below we will go a little deeper into the aforementioned risks:

Default Risk

Anyone with a little notion about trading knows that you should not enter into an operation without first knowing the potential risk of it and without having placed a stop loss as a form of protection. For example, a good substitute for the practice of buying and holding in the stock market is the use of a trailing stop of 25%. In this case the initial risk is 25% of the entry price. The trader will be wrong about a trade if the price falls below that level, so he will immediately have to go out and take his losses. With a trailing stop, each time the market moves in the desired direction and makes a high or a low,

Risk in position size

It is the total risk associated when the operator multiplies the number of shares / currencies / commodities that it acquires when making a trade. Whatever the transaction, it is not recommended to risk more than 1% of the capital used to invest.

Market risk

Currently the financial markets are really big and the small operators all we have left is to always try to go with the flow. If the market goes down or rises we should try to go with it. However there is always the risk that the market will turn against us and what promises to be a winning trade becomes one that only brings us losses. To mitigate the effects of this risk we must always control the size of our positions.

Risk of the company with which we are investing

The reality is that there is always a risk that the company where we have our investment will fail and fall. For example what happens when the company that holds a whole group of ETF suddenly falls, as happened with Lehman Brothers. Or what if the company behind your mutual funds falls or if the same happens to your Hedge Funds. Or if it happens the same as in the famous Madox case in which those companies eventually turn out to be a Ponzi scheme. These forms of risk are quite real in the current times. So the wisest thing to ask yourself is: What could possibly fail to turn these investments into a total loss or keep me tied to the courts for a long time?

Psychological risk

This is probably the biggest risk of all because many times the worst enemy is the same trader. A good trader can have an efficiency of 90%, which means that he can make a mistake in one of every ten trades, where that error is simply because he did not follow the rules of his trading system. This is probably the biggest risk you can face at any time when you operate in the market. Also the trader who does not have a guide to written rules to operate, the truth is that he is doing everything wrong from the beginning.

Typically, people open their positions ignoring the potential risks they are taking. However if you study and understand these risks, you will be able to minimize them.

The Five Qualities Of The Best Forex Traders

People often ask the experts “What qualities do the best traders have that make them what they are?”. It may seem on occasion that large traders, those who make money constantly in the market have special features that make them better than others, But the reality is quite the opposite. There are a number of simple yet fundamental characteristics that have allowed them to succeed where so many fail. We present below the five most important qualities that every trader should have:

1. The ability to understand that good and bad results are due to us and not to external factors.

Many traders do not understand this concept. On the contrary they repeat the same mistakes over and over again because they blame external factors for their failures in the market. For example, many operators do not manage the concept of monetary management and perform operations with a volume greater than that recommended for their operating capital. Then, in a sudden movement against the market takes away almost all of their money or worse still leaves them on the street. Until those traders are unaware that they need to apply monetary management techniques they will continue to repeat the same mistake and thus losing money in operations too risky for them.

Good traders constantly determine how they produce their results and work to correct their mistakes. In short, they create their reality.

2. Have the interest and desire to really know ourselves.

It is impossible to become good traders and create our own results in the market if we do not know each other intimately. Most people live their lives as automatons, doing things without knowing why and only because they were programmed by the culture, the environment that surrounds them, their family and their friends. People rarely understand that in life there is always an option for everything.

Good traders study and challenge themselves constantly, as well as their actions, thoughts and reactions.

3. Acquire the discipline of working continuously to improve itself.

Good traders generally maintain a constant interest in working and improving themselves. Continuous improvement is something that never ends, as there is always something that can be done better, and that is something a good trader knows. Rather than looking for a perfect trading strategy that never fails, it focuses more on eliminating those aspects of your personality that affect your performance in the market.

In trading as in everything in life, discipline creates excellence, and working on ourselves is something that all traders must do without exception, if they want to be successful.

4. Have the ability to develop good strategies

Good traders tend to have great skills for games such as chess, poker, backgammon, ladies, etc., because they are able to create good strategies and follow them to the letter. These traders execute their strategies based on robust trading plans that they have created to guide their trading.

They have also taken the time and effort to formulate meaningful goals. In order to achieve these objectives, they have developed effective strategies that take into account the multiple scenarios that can occur in the market and the response to be faced.

5. Develop the ability to enter “the zone”

The best traders can become one with the market and feel precisely that they are doing this. These operators have the ability to live in the present moment without being influenced by the past and the future. It is a fairly intuitive state and usually gives you a total sense of how successful your operations in the market will be even before you do them.

What Is Margin Call In Forex Trading?

To understand the concept of Margin Call first you need to know what the Margin means.

The margin can be defined as the amount of money in the account that is needed as a guarantee to carry out operations in the market. Each broker can set different margin requirements. It is calculated by the size of the operation and the leverage. For example, if we operate with 1 lot and have a leverage of 1:100, the margin required if the base currency is the USD is as follows: 100,000 USD / 100 = 1,000 USD. This means that for each batch transacted, we require to have in the account a capital of 1,000 USD. If the base currency (the first of the currency pair) is not the USD, the broker converts to that currency.

The free margin is the one available to carry out the operations. Following the example above, suppose that we opened a trading account with 2,000 USD. If we want to open a position of 1 lot, this requires an available margin of 1,000 USD, so once the position is open we have a free margin of 1,000 USD.

Continuing with the margin call: If we suffer losses that leave the free margin below the margin required to cover open positions, the broker will proceed to perform a margin call and close all operations. Due to the fact that at the moment open positions add up to significant losses, the transactions are closed as a security measure of the broker to prevent the trader finished with a negative balance. This is done for the benefit of the trader and of course for the broker, since in this way the trader does not get to the point of owe money to the company.

Example: Assume that we have an account with USD 10,000 and a leverage of 100: 1 and we open a position with 1 lot. In this case the margin used is USD 1,000 and the free margin is USD 9,000. If the losses exceed $ 9,000, the broker will apply a margin call.

Basically this is the way the margin call works, however, each broker may have different margin policies and it is the trader’s job to find out these before opening an account and performing an operation.

Things to keep in mind: Some brokers increase margin requirements during weekends. For this reason, if an investor plans to keep positions open during the weekend should be informed of the broker’s policies in this regard. There are brokers with a margin requirement of 30% and even higher.

Concepts such as margin requirements, leverage, level of risk and others related to Forex trading must be fully understood by the trader. Also, it is equally important that the trader understands the margin policies of his broker so that he is aware of the rules of the game before performing a single operation.

Why Should You See Trading As A Business?

If we regularly operate in the market we surely do it to win and the only way to make a profit in the long run is to treat trading as it is, a serious and real business that we should visualize like any other type of business. In this article we will explain precisely how to do this, which will provide us with a number of practical and psychological advantages. Likewise, we are going to analyze two primary mistakes that most traders make, especially beginners, and eventually lead to ruin.

Facts regarding trading

The idea of trading is attractive for many people: to become their own boss, set their own hours and work from home while enjoying a virtually unlimited income potential. In addition to these factors , anyone with a computer, Internet connection and a small trading account may have a chance. Nor should we deal with employees, customers and competitors (in the traditional sense), in addition to other benefits.

Because of these factors, people often fail to recognize or realize the financial, emotional and time commitments that are required to build a successful business based on trading. Here are some quick facts about trading:

About 90% of daytraders fail in the first year

There is no way to eliminate risk in trading

There is no trading system that earns 100% of the time

There will always be losing trades, even if you are a star trader with an excellent trading strategy

It takes money to make money – it will take a long time to earn a good sum of money with a small trading account

Successful independent traders can earn a decent amount of money, but most do not become Warren Buffet style millionaires.

Why should we see trading as a business?

An immediate psychological benefit of trading as a business is that it gives you a different vision and feel. Many traders see trading as their future and for some it becomes part of their identity. Although it is a business as we have already mentioned, we must visualize it as a separate activity in which we participate but that does not define us as people. Trading is a business that we own and is part of but does not constitute our total identity. The approach of trading as a business gives us a separation and detachment needed.

Also, building a long-term business means inherently organizing and systematizing all trading activity, with an eye on the future. This requires thinking about the inclusion of objectives and the necessary resources along with the activities by means of which these objectives will be fulfilled. In this way, our operations will be limited to a very limited degree if we have only the vision of trading as “a way to make money”. Of course we all want to make steady profits, but the reality is that we can not expect to consistently win a business that has never been properly organized. A business that is conscientiously planned and organized provides security and relieves pressure and stress.

Another significant potential benefit is that we avoid significant opportunity costs. Each month in which the trader operates and obtains few or no profits represents an opportunity cost because he has spent time while his investment capital has been tied up when he may have been employed to generate profits in other types of business. If a profit is not obtained in a month and in general no process was performed towards the profitability of our trading business, then the opportunity cost becomes personal at that point because the time lost unproductively in the trading could at least be Employee with family or other personal interests.

What Is Financial Market?

A financial market can be defined as a mechanism that provides the possibility for various economic agents to carry out the exchange of financial assets of various types. In general terms, any commodity market can be considered, for example, as a financial market if the purpose of a buyer is not the immediate consumption of the raw material itself, but the delay in consumption over time to make a profit with the Variation in price. However, financial markets today are not limited to raw materials as they cover all types of financial assets, some of which are extremely complex, such as derivatives . In fact, current investors have the ability to trade with hundreds of thousands of assets of all types.

Like any other market, financial markets are affected by the forces of supply and demand which determine the price of assets. Basically, the function of the market is to place buyers and sellers in one place so that transactions are carried out with the greatest efficiency. Hence, the various advantages that the financial markets present for the various economic agents arise, among which we can highlight the following:

The increase of capital, especially in the capital markets.

They facilitate international trade, especially in the case of globalized financial markets like Forex (the foreign exchange market).

They allow risk transfer, as in the case of derivatives markets.

They are a way to bring together those investors who need financial resources with those who have them and look for where to invest their capital

General functions of financial markets

Based on the above points, three general functions can be defined for the financial markets, which summarize their functioning:

Determine the prices of the various financial assets based on the supply and demand of them. In this case it is the relationship between sellers and buyers at any given time that determines the price of an asset.

Establish the necessary mechanisms that facilitate the contact between buyers and sellers who wish to negotiate.

Limit the costs of intermediation in transactions, in order to facilitate a greater volume of negotiation.

How do you invest in financial markets?

As already mentioned, there is a large number and variety of financial assets that can be chosen to invest and which are listed in hundreds of financial markets around the world. The most prestigious assets are those that are listed in the United States and Europe. Any investor who wants to invest in the financial markets, requires an account with a broker or prestige broker (an example are some Forex brokers ) and learn the use Of the different tools necessary to analyze and interpret the quotations in the different markets.

Of course, there are different types of investors, each with its own investment style and methodology, which depends on the assets it trades with, the type of market and the period in which it intends to make a profit (periods of speculation). In this way, the different times of speculation offer a whole range of investors ranging from those that operate in the long term (months and even years) to those that speculate with the daily movements of the price of the assets.

Among the methodology used by investors to analyze the market, two stand out that although in some aspects collide, they can be used together to obtain a better panorama of the behavior of the market. This is fundamental analysis and technical analysis . The first approach is based on the study of the events that move the market in one direction or another while the second is based on the study of the price of the asset in such a way that it serves to optimize the entry and exit of the market, looking for it Decrease the risk of each operation.

What Is Financial Derivative?

Financial derivatives or derivative instruments are defined as all financial products whose value is based on the price of another asset. In this case, the asset on which the derivative depends is called the underlying asset, for example, as in the case of the Future over gold, the underlying asset becomes logically gold (a commodity) since it is based on the Price of this. The main function of the derivatives market is to provide financial instruments for investment and hedging that allow adequate risk management. With the derivatives, the underlying assets can be of many types, among which we can mention the following:

  • Shares of the Stock Exchange.
  • Stock indexes.
  • Foreign exchange.
  • Raw materials (commodities).
  • Interest rates.
  • Fixed income securities.

The derivatives market can be divided into:

Stock Market: It is the market in which the operations are carried out in a recognized stock exchange. If you talk about Latin America for example, in Mexico, the Derivatives Exchange is known as the Mexican Derivatives Market (MexDer) which operates with Futures contracts and options on the dollar, the euro, stocks, bonds, interest rates and indexes. In the United States, a recognized exchange that works with derivatives is the Chicago Stock Exchange, which is the leader in the negotiation of futures contracts in the trade of agricultural goods.

Extrabursatil Market: This is the market where transactions are carried out directly between buyers and sellers without a central counterparty that serves to reduce credit risk.

Main features of financial derivatives

Financial derivatives have the following general characteristics that must be taken into account by every investor:

Derivatives require a very small initial investment and in some cases zero in comparison to other types of contracts that present a similar response to changes in general market conditions. This allows the investor to have higher profits as well as higher losses if the transaction does not develop as he believed.

The value of the derivatives changes in response to changes in the price of the underlying asset. Currently there are derivatives on all types of assets such as currencies, metals, agricultural products, livestock products, stocks, stock indices, etc.

Derivatives can be traded on organized markets such as stock exchanges or non-organized ones, or OTC.

Like all contracts, derivatives are settled at a future date.

Types of Financial Derivatives

Basically you can divide the financial derivatives that are currently traded in the following types:

1.) Derivatives according to the type of contract

This classification can be divided in turn into the following typology:

Options

Futures (either in Organized Markets or in OTC markets, where they are known as Forwards).

Contracts for Difference (CFD)

Swaps or exchanges (SWAPS)

2.) Derivatives according to the complexity of the contract

According to the degree of complexity of the contracts, the derivatives can be divided into the following types:

Exchange-Future-Conventional Option : Also known as “Plain Vanilla”.

Exchanging-Futuro-Exotic Option : This type includes “Bermuda” and “Asian” type options.

3.) Derivatives according to the place where the negotiation of the contract is carried out

Depending on the place where the contract is negotiated, these are usually divided into:

Organized Markets or MMOO: In this case the contracts are standardized which means that there will be only derivatives on underlying assets that the market has previously authorized. In addition, both the prices in exercise and the expiration of the contracts are the same for all participants. In the organized markets there is a greater transparency with respect to the prices.

OTC or “Over The Counter”: These are derivatives whose contracts (underlying assets, terms and others) are tailored to the parties that contract the derivative. With the OTC, there is no standardization in the Organized Markets, which means that both parties can set the conditions that most favor them.

4 ) Derivatives according to the underlying asset of the contract

Likewise the derivatives are usually classified with respect to the underlying asset that they use in the following types:

Financial Derivatives: These are the derivatives that use assets such as stocks, currencies, interest rates, credit risk and bonds.

Non-financial derivatives: Derivatives that fall into this category include those that use commodities as the underlying asset. Among the raw materials that are used in operations with derivatives we have food (cereals, citrus, soy, corn, etc.), metals, energy (oil, gas, electricity and others) and others.

Derivatives on assets of other types : Today, it is also traded with derivatives that use underlying assets of other types such as general indexes of prices, inflation and even climatic conditions.

5.) Derivatives according to the purpose of the contract

Finally we have derivatives that are classified according to their purpose. These are usually classified according to the following types:

Coverage derivatives: These derivatives are used as a tool to reduce risks. In this case the opposite position is taken in a futures market against the underlying asset of the derivative.

Arbitration Derivatives: Derivatives that seek to take advantage of the difference in prices between two or more markets. Through arbitration, market participants can achieve a virtually risk-free gain. With these derivatives, profits are achieved because of the difference in market prices.

Trading Derivatives: Derivatives that are traded in order to obtain gains from speculation on the price of the underlying asset.

What Are Pips And Lots In The Forex Trading?

A pip is defined as the least possible change in the value of a currency pair . In this case the amount of pips or points measures the difference between the entry price and the starting price in any Forex transaction. For example if the GBP / USD moves from 1.6225 to 1.6250, that is a rise of 25 pips . You can define a pip as the last decimal in the quote. It is through the pips that the gains or losses in an operation are calculated. Because each currency has its own value, it becomes necessary to calculate the value of a pip for each particular currency.

For example, in pairs where the US dollar (USD) is the base currency, such as the USD / JPY, the calculation would be as follows:

Assume that at a given time the USD / JPY has a value of 90.80 (note that for this pair only two decimals are used while for others up to four are used). For this currency pair, 1 pip is equivalent to 0.01, which means that if the pair price is at 90.80, the value of the pip would be given as follows:

Value of pip = 0.01 / quote = 0.01 / 90.80 = 0.0001101 USD / pip

It might seem that the value is almost nil, but the reality is that this is related to lot size and leverage as we will see below:

What is a lot?

When trading in the Forex market, it is done by means of lots. First we have standard size lots worth $ 100,000. Depending on the type of account and the money available that we have in that account, we can also operate through mini lots of $ 10,000 and even $ 1000 micro-balls. As explained above, the movements of the prices of the currencies are measured in pips, which constitute the smallest possible increase. In order to make a profit from these small increments, we are in the business of trading large amounts of a particular currency pair in order to make a significant profit, but it can also suffer large losses.

Forex bundles are defined in relation to the amount of money in each transaction. Depending on the amount of each lot are divided into the following types: Types of lots in the Forex

Standard lot: The lots are formed by an amount of 100 000 units of the base currency in any pair. In this case the amount that the investor must put depends on the leverage that is used. For example if it is 1: 100, to perform an operation with 1 lot the investor has to risk 1000 units of base currency. So if we trade in the EUR / USD pair with a lot and with a leverage of 1: 100, we have to risk 1000 euros. Batches are used in standard accounts.

Mini lot: A minilote on the other hand, consists of 10000 units of the base currency. In this case if we operate with a minilote using a leverage of 1: 100, this means that we risk 100 dollars from our account while the broker “lends” the rest.

Micro batch: A microlet represents in reality a 0.01 batch, that is one-hundredth of a standard batch. If we operate with microlotes and with a leverage of 1: 100, this means that at each operation we earn at least 10 dollars. With each microlote, 1000 units of the base currency of the pair are traded.

Types Of Financial Markets

Financial markets can be classified according to various criteria. The following are the most common:

1. Classification according to the transferred assets

Money Market: In these markets it is traded with financial assets that have a high liquidity and a maturity that is usually in the short term. These are assets whose maturity is usually less than one year.

Capital Markets : In this type of market, it is traded with assets that have a longer maturity, usually in the medium to long term. They are assets necessary for the execution of various investment processes. Capital markets are divided into the following types:

Stock markets: These markets provide financing to companies through the issuance of shares, at the same time allowing the exchange of shares through purchase and sale transactions.

Bond markets: These markets provide financing through the issuance of bonds, at the same time allowing the exchange of these through transactions.

2. Classification according to its structure

According to their structure, markets can be classified as follows:

Organized markets: A classic example of this type of market is the New York Stock Exchange that brings buyers and sellers of stock together in one place.

Over the Counter: These are markets in which the trading of financial instruments is carried out directly between the two parties (buyer and seller) without any intermediation. The biggest example of the Over the Counter market is the foreign exchange market, which is totally decentralized and where transactions are carried out directly between the participants.

3. Classification according to the negotiation phase of the financial assets

According to their negotiation phase, the markets are classified into two basic types:

Primary Markets: These are the markets where the financial assets are created and in which these are issued directly by the issuer.

Secondary type markets: In these markets, the exchange of existing assets is carried out and has already been issued in advance. They generally allow investors holding financial assets to sell those that were already issued in a primary market or that had already been traded on a secondary market (which they currently hold). Secondary markets also allow you to buy financial assets freely.

4. Classification according to the type of financial asset that trading

There are currently many types of assets that can be traded in financial markets, some of which are particularly complex. The main markets for the number of financial instruments they offer and the volume of regular trading are as follows:

Foreign exchange market (FOREX): It is a global market, the largest in the world in which foreign exchange is exchanged, especially those belonging to the most powerful economies. Every day transactions are made for billions of dollars in this market, whose volume far exceeds that of any other.

Commodity markets: They specialize in the trading of commodities, especially commodities such as petroleum, metals, agricultural products and many others. This type of market also has an extremely high trading volume.

Financial derivative market: These are markets that offer various specialized instruments for the management of financial risk. An example of a financial derivatives market is as follows:

Futures Markets: These are the markets that are traded with Futures Contracts based on a wide variety of assets, from raw materials such as gold and silver to financial instruments such as currency pairs. A Futures contract may be defined as an agreement that obliges both contracting parties to purchase or sell a certain number of securities or assets (also called underlying assets) at a price established in advance and at a future date determined in contract.

Forwards Markets: These types of markets specialize in standardized Forwards contracts that are used to trade all types of products at a future date. Among the most common instruments used with Forwards contracts are currencies, metals and various fixed income instruments.

Stock markets: As the name implies, these markets allow the issuance and conduct of negotiations for the purchase and sale of shares of companies that decided to become public and obtain financing through the sale of shares.

Insurance markets: Their function is to allow the distribution of various risks. Basically in these markets trade in instruments such as insurance contracts.

With respect to theories about how financial markets work, there are a number of approaches that have become popular and have their followers. In some cases these theories affirm that the movements of the market can be predicted whereas others affirm the opposite. Next we will explain one of these approaches known as Random Walk Theory.

Is Forex Trading Requires Certain Skills?

Being successful in any business means recognizing the need for certain skills and knowledge required and trading is no different in this regard. Many people start trading without even focusing on the skills required to become a successful trader. Many people live in denial of this fundamental requirement and let the desire to earn money fast lead them to the erroneous conclusion that all they need is a system and the will and discipline to follow it strictly and with this alone everything will go to the Perfection, which of course is not true.

But when a trader / business owner chooses to acquire and develop the right skills, that’s where he’s really played to win by saying it somehow. Instead of asking yourself “How can I make money? , The smart trader seeks to improve his skills and increase his knowledge through study, practice and training with professionals who have the skills required.

The fact is that there are skills and knowledge necessary to function as a competent and self-sufficient trader, able to operate from a position of trust. The trader must have at least a moderate level of ability to select, evaluate, develop and optimize a profitable long-term trading system . Without these skills, the trader is left in a forced position in which he depends on what others do, which creates a situation where trust is not well used in the first place, and what is worse is easily destroyed when they occur A few losing trades.

When a trader lacks confidence, that is to say when he constantly doubts, fear and lack of judgment constantly interfere with his operations in the market, resulting in costly mistakes. It also causes stress which of course is counterproductive in relation to decision making and overall performance. Without proper capacity in these areas, the trader depends on the experience of others, which inhibits solid and consistent performance in the execution of the trading plan.

One aspect to consider when taking shortcuts when employing trading systems created by others relates to the very quality of these systems, even if they are based on a decent strategy. Many systems lack one or more qualities necessary to make them easy to follow, which makes them even more complicated to run consistently. The only way to avoid this situation is for the trader to have sufficient knowledge to properly evaluate the system, determine its potential and correct those aspects that negatively affect its quality level so that it can operate with confidence.

Recommendations to get started in the trading

As a business, trading requires constant research , evaluation and discipline. There are no guarantees in the trading business , and you could work a 40-hour week and still end up losing money. Anyone who considers trading seriously should make sure they have both the personality and the financial means to take on this type of activity.

Before you begin, the person should ask:

  • Am I oriented to succeed?
  • How do I handle losses?
  • Do I have the time and interest to dedicate myself to learning the trading business?
  • Can I follow a plan?
  • Do I have the support of my family?
  • Do I have the money I can afford to lose?
  • How do I deal with stress?
  • Do I have realistic expectations?

If you want to become a part-time or full-time trader, it is important that you take the time to research and plan your trading business; These are essential steps for anyone who wants to succeed as a trade. This is not a profession in which you will be qualified overnight (in fact there is no such profession). Traders that start trading early or without a well researched plan often find themselves back at the beginning, but with much less capital than they had before they started. Traders who have realistic expectations and who treat trading as a business – rather than a hobby or a way to get rich quick – are more likely to overcome the obstacles and become part of the group of successful traders .