Advantages of Demo Accounts

    Before you dive into online trading with a head and start to trade your own real money, the most important thing - try your hand on a demo account. According to its functional characteristics demo account does not differ from a live trading account. It uses exactly the same trading platform, as well as in real trading. The only difference is that you are trading with virtual money. Other characteristics like movement of exchange rates and financial instruments, making deals, technical analysis and installation of pending orders repeats the real account.

  The demo account allows the trader to get acquainted with the trade practices in the financial market, as well as to gain experience with the trading platforms. A demo account is an indispensable tool for sharpening trading strategies, systems, and automatic expert in the real market conditions.

  The only drawback of demo accounts that a lot of traders and personally I experienced is that you don't feel the real risk of losing money and you can allow yourself to trade irresponsibly. Good thing it quickly disappears when you start to trade on real accounts.

  In the future, when you become an experienced trader, you can also use a demo account. Since it's a great opportunity to test your trading system (strategy) on real data in real time, before applying it to real money. Professionals always recommend to test the new trading systems on a demo account, and only then use them in your real trading.

Trading Stocks. Is It Still Profitable?

Stock trading is basically buying and selling shares. Investments and return on investment аrе two main components of the trading process. This kind of trading has arisen with the advent of the stock markets, and these, in turn, appeared when companies decided to earn money by selling their shares. Speculation in shares, as well as gambling in general, may seem complicated and even confusing, but it is only at first glance.

Online trading - this is another way of making money online, and more and more people every year give it preference. Before you buy and sell stocks, you need to know exactly what the advantages and disadvantages are included.

 First, the stock market, as well as in other financial markets, the profit can be obtained through a minimum period after the investment of their funds. Secondly, with the help of the Internet and special software trading platforms, each trader has the opportunity to trade, no matter what corner of the world you may be. Finally, in the third, and traders and brokers can monitor, check and analyze the state of the stock market every minute.

 The main disadvantage is the relatively low profitability compared with Forex or futures. Another drawback is the inability of short transactions (transactions on sale), and as a result, reducing the potential profit. In addition, there are certain fixed costs, provided the stock market system and brokers, which you cannot avoid. Sometimes you need to have pretty large sum of money on your account in order to buy some stocks.

Work on the stock market through the Internet is much easier to conventional trade. Besides the fact that the commission is not so big, the process of trade is much easier and limited understanding of the interface of the trading platform. The lack of real live intermediaries is both an advantage and disadvantage of stock trading via the Internet, as sometimes professional advice is still needed.

Why Trading Futures?

  For many investors, the futures market is the fastest growing financial sector in the world. To a large extent, this is because a wide range of different strategies and high liquidity. However, many private traders seems too risky and complicated. Let us understand whether this is so.

  Futures - a derivative contract to buy/sell the underlying asset at a certain date in the future, but at the current market price. Accordingly, the object of such a contract (the underlying asset) can be stocks, bonds, commodities, currencies, interest rates, products and other.

  A simple example. The farmer planted wheat. The price for this product on the market today, conventionally, is $100 per ton. At the same time predictions are made that it will be a good summer and harvest in autumn. Excellent that always cause the increase in supply in the market and falling prices. The farmer does not want to sell grain in the fall of $50 per ton, so he negotiates with a certain buyer that is guaranteed to put him a ton of grain in 6 months, at the current price of $100. That is the farmer thus acts as the seller of a futures contract.

  In the world of online trading, everything works the same. All futures contracts are placed on the stock exchange, and the initial contract price may begin to change (it all depends on the demand). Now the fun part: if you want to make money, you will be beneficial to buy a futures contract at a lower price and sell more expensive (pure speculation). In this case, you can grab the profit.

Trading futures is more affordable than other financial tools, because you are actually buying contracts (which are much cheaper), not the real assets, and sell them before expiration time. They call it “making money from the air”.

Forex. What Is It?

   Forex or foreign exchange market - the largest financial market in the world with a volume of trades over 1.5 trillion dollars a day. Unlike other financial markets, Forex has no physical expansion location and central exchange. It operates through an electronic network of corporations, banks and individual players, operating with currency transactions.

  

  The essence of Forex - money. Money around the world are bought, sold and traded. Forex involves buying and selling currencies for profit. For example, you can earn income by buying the Japanese yen when it rate against the dollar is anticipated to grow, and sell when it is the opposite situation.

  Forex trading requires knowledge of a variety of special terms. The symbols used for the representation of currencies in the Forex market, consist of two parts. The first part - the first currency, the second half - the second currency used. Symbol "usdjpy" means US dollars vs Japanese yens. It is necessary to learn how to navigate in the notation of currencies.

  Trading in the Forex market, you can use the services of a broker. If you decide to hire a broker, there are several critical factors that must be taken into account when choosing. The first important point - give preference to a broker offers low spreads. Since Forex brokers do not charge commission they earn on spreads, or the difference. In the search of a broker note on these issues and compare candidates according to criteria.

  The broker must rely on large financial institutions. Bankers in the Forex market are usually associated with large banks or other financial institutions. Note that if the broker is not associated with the bank, it is not necessary to make a choice in his favor. There are lots of “fake” brokers who can just steal your money in different ways (artificial rate change, account blocking, etc.), so be careful.

 As for me, Forex is the easiest tool to start learning about online trading.

The Blurred Line Between Fundamentals and Technicals

   

Let's look straight. Before making your first deal you should conduct some sort of analysis, right? In the world of online trading, there are two kinds of the financial market analysis: Fundamental and Technical.

   Fundamental analysis deals with the study of the world monetary and financial groups, political and economic situation in different countries and international community as a whole. The main purpose of this method of analysis is definition of events that may have an impact on the financial market, as it will change prices of the actives. Therefore, everything including operations of large companies, interest rates of central banks, political and economic events, confirmed by the media, and even rumors should be taken into account. Now it's not difficult to track all these news, you can just go through couple websites like Bloomberg, Investing.com and others.

As you probably heard, financial market is usually represented in different kinds of graphs. So technical analysis is graphical and mathematical (computer) studying of graphs on different platforms, provided by a broker. It is based on the nature of the market, which consists of alternating periods of growth and decline. Price movement is subject to trends. There are lots of indicators and strategies that can help you to build your own forecast and make a decision about the opening of the position. Everything about technical analysis you can read in amazing book “Technical Analysis ofthe Financial Markets: A Comprehensive Guide to Trading Methods andApplications” written by John J. Murphy.

  The assessment of the financial markets, in overall, has to combine both kinds of analysis. However, every trader chooses for himself what kind of analysis is preferable. The main thing is to decide what type of analysis you believe more, and strictly follow its’ instructions.

Investing vs Speculating - Owners vs Borrowers

  

First, let’s clarify these definitions.

Investing – is actually buying stocks, securities that ensures partial ownership of a company. By purchasing a share of the company, you become part owner, together with other investors owning the same stocks. The purpose of investing is keeping stocks for long period of time and receiving dividends, if the company is profitable. One of the most successful investors in the history is Warren Buffett. His genius investing strategies and tactics are explained in the book “Buffettology”, written by Mary Buffett. She was his daughter-in-law, who divorced his son and revealed all Warren's secrets in the book (sneaky, eh?). Be sure to read it. 

  Now about speculating. It’s buying a stake of securities and other instruments for a short period of time, at low price and selling it with an increase in their value, earning in this way on the difference in rates. The main advantage of speculating is that it often brings fast and serious income. There is no need to spend a long time on the market analysis and the study of the prospects of a company. Speculators work quickly, almost intuitively.

                                  

             About how speculations began to dominate the investment  

  This conclusion is made by John Bogle, founder of the first index fund, in his book "The Clash of the Cultures: Investment vs. Speculation". The culture of long-term investment is being replaced by short-term speculation, and the cost of stock transactions deprived of a significant part of investors profit. It is not profitable to invest anymore. Analyzing the clash of different financial cultures, the author calls for a return to the general principles of long-term investment, and warns of the consequences that are harmful to the state, society and investors. The book is extremely interesting, it explains the reasons of 2008 crisis and inevitable future crisis. Anyways, speculating prevails nowadays…

In my next posts I will describe tools, available for speculations.

             

                                   John Bogle: Investment vs Speculation

Introduction to Online Trading

 Money. Money is essential part of modern economy. The money issue is getting more and more aggravated in this world, people are looking for new ways to earn more and increase their capital. One of the ways that can achieve this goal is online trading. Why exactly online? - Let's see.

The answer is today's reality. Internet has been present in our lives for a quiet long period of time, and every year its influence on the "offline" life is increasing. Therefore, a majority of stock exchanges, brokers and other related structures have migrated to the internet, and it played good for everyone. Nowadays, a part of population engaged in trading do not need to go anywhere, you just have to open a broker website on your laptop, make a cup of tea or take a bottle of your favorite beer and get down to business. There is overwhelming amount of information in the internet, resources needed for a regular person to become a professional trader. 

   

   However, if it was so simple, any student could become a millionaire, and my grandmother would be sitting on the yacht, sipping champagne. Therefore, I have to say: online trading - is not for everyone and definitely not for wimps. If you take this route, be prepared to spend up to 5 years of training, constant nervous breakdowns and losses of your honestly earned shekels.

   Why so long? - you will ask. During this time, a person totally changes the attitude to money, suppresses the state of greed and learns how to control the risks. It grows out of the "ordinary inhabitant" into the "guru", capable of making a four digits sum a day, and then loose couple grand in a click. But it's not a tragedy, because yesterday he earned even more than he lost today. For this kind of people, it's just another common day. 

 Learning online trading is a big challenge. And if you want to accept it, welcome to my blog!

                                                                 Who are traders?