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Making Money - New Traders
Is trading all about making money, if so how can one get involved in it? I will try and explain this like I would to a 10 year old - so let's start from the beginning! "One horse race without the rider?? - C'mon now we all know there is no such a thing!..well this is just so that I can make it easy to understand and I did say that I will try and explain this like I would to a 10 year old (sorry 10 year olds - no disrespect to you)"
In this race you bet (trade) on the direction you think that the horse will run – you can bet on the horse to run in the “north” direction or you can bet on the horse to run in the “south” direction. The added benefit is that you can enter and exit at any time you wish; you also don’t have to stake your money before the race. You can cash in your profits and get out at anytime (before the horse changes its mind); you certainly don’t have to wait for the race to finish! A bet staked on the horse to run in the “North” direction is a “BUY” bet where as a bet staked on the horse to run in the “South” direction is a “SELL” bet. If the horse decides to run in your predicted direction – you are making money! Every gallop the horse takes in your direction, multiplies your profits (leverage)…for argument sake you staked £10 a gallop (point or pip) and if the horse (lets call it Price) makes 100 gallops in your predicted direction then your profit would equal to £10 (your bet) X 100 gallops (pips) = £1000 (profit). That’s fantastic you say – so why isn’t everyone making money? The dark side to all this is that if the horse decides to run in the opposite direction to your prediction then for every gallop the horse takes, you will owe the brokers (leverage working against you). Your profits and losses can be equal to or over and above the money you deposited as trading margin with the brokers … be warned, you could loose your pants if you don’t know what you are doing! There is however a safety net to all this – you can limit your losses in trading by applying carefully planned stop loss orders, money management and discipline. You must cut your losers immediately and let your winners run! Easier said than done, a well known fact is that your biggest enemy when trading, is within yourself and success will only come when you learn to control your emotions. So if trading is so risky, why are so many attracted to it? Mainly for the attraction of making money! The truth is every one has their reasons many are just uninformed and untrained people who think they can make easy fortunes trading. Some trade the news, others trade tips…some seek guidance from the rainbow, tea leaves in cup, mother-in-law moods (sorry mum...just kidding!) and some on just a “Hail Mary”… in other words these are just gamblers! So what must you do to get over this problem you ask? You need to arm yourself with the required skills and this will only come with training, training and lot of discipline. Always bear in mind that Investing and trading involves dealing with probabilities – not certainties… if you are not capable of handling losses, then trading is definitely not for you - stay clear!
So how is market price action recorded and traded?...click here
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