The accessibility of online trading and the openness of the financial markets have raised many’s curiosity lately. While some have already benefited from the opportunities, there are the curious and still hesitating part of aspiring traders. The recurring question in their minds is: is there a real profit behind it? Here are some answers.
Cryptocurrencies, stocks, and Forex – the opportunities for profit
When it comes to odds for profit, we will start with Forex, the most popular lately and the most liquid market. The Forex is the world’s market of currency exchange. Traders assess currencies’ value and try to exploit their volatility in exchange rates with other currencies to make a profit. The more a currency varies, the greater the profit (and risk).
Bitcoin trading is similar to Forex because traders are essentially trading one cryptocurrency for another currency, which is also Forex’s principle. However, Bitcoin’s more unpredictable volatility and taking a long-term investment position are advisable.
On the other hand, the New York Stock Exchange’s involvement and new crypto investment funds have bolstered the general population’s opinion of Bitcoin’s ability to hold its value. Even with the negative elements, such as media criticism, the demand for Bitcoin has increased and continues to rise steadily.
Bitcoin has a volatility of around 5% to 15%, with an average volatility of 10%. For this reason alone, Bitcoin attracts high-risk traders.
Forex and Bitcoin are both available on trading platforms based on MetaTrader 4 trading software to trade cryptocurrencies and fiat currencies in the best conditions. Nowadays, most brokers allow trading assets such as cryptocurrencies, stocks, and Forex at the same time.
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Trading stocks – Long term vs. short term trading
Trading stocks usually rimes with long-term investment. Long-term investors tend to prefer fundamental analysis because it focuses on the company’s long-term strengths and potential. Value investors like Warren Buffett base their buy and sell decisions on the intrinsic value they estimate through fundamental analysis. Long term approach is suitable for stocks and crypto traders, but when it comes to Forex the key to making profits is in the volatility of currency pair prices within a day or even minutes. When we are talking about short-term strategies, day trading is the most popular one.
Determining the value of the assets
The fundamental analysis represents the estimation of the intrinsic value of an asset. Let’s take the company’s stock as an example. Fundamental analysis considers a large amount of data relating to the company, its competitors, the industry, and the economy as a whole.
You can apply fundamental analysis to any asset, from cryptocurrencies to stocks. The aim is to determine whether it’s time to buy, sell or hold the asset. For instance, you can decide on buying an incorrectly undervalued asset and wait until its price rises and the market trends change. However, the factors to look for are different depending on the type of the market.
In case you are a Forex trader, you will look into the central bank data and the specific country’s economic data. Regarding the cryptos, you need to evaluate the crypto sector’s overall state, including public adoption and public confidence in the specific cryptocurrency value. As public adoption increases, the demand for Bitcoins will also increase; coupled with emerging markets that accept Bitcoins, the prevalence of Bitcoin will expand.
Factors that affect Forex are public debt, interest rates, political stability, and the economic health of the nation involved. Crypto is even more specific and challenging to predict, so going long for crypto trading is the recommendable approach.
On brokerage platforms, the traders have all data relevant for the trades available in the form of technical analysis. But when it comes to fundamental analysis, the traders must also rely on their own research and be up to date with the latest economic news.
Making profit with day trading stocks, Forex, and cryptos
The principle of day trading is quite similar for Forex, cryptos, or stocks. You find the assets with the most volatility and the biggest changes in gain and losses. You can start trading with the minimum deposit and make profits from small price movements on the market. It can turn out to be a very lucrative game if you enter prepared.
No matter if you trade stocks, cryptos, or foreign currencies, you need to give some effort to practice on a demo account. There is no 100% sure answer on which stocks, crypto, or cryptocurrency pair to start daily trading. Every trader does their own research. However, make sure that there are high trading volumes paired with heavy price movements and tight spreads. A heavy price movement should be the priority because it’s the opportunity to make fast in and out profits.
Risk management when trading stocks, cryptos, or Forex
Managing risk is part of every trading and investing, no matter the market you choose. Here are some main principles of risk management for newbies when trading stocks, cryptocurrencies, or foreign currencies.
Don’t invest more than up to 2% of your capital per trade. Also, when it comes to day trading, beware that the trader needs to spend most of the time in front of the computer screen. Make sure you have enough time to dedicate.
Another simple way to protect yourself against risks is to always withdraw part of your earnings. It may be reasonable to withdraw a percentage of your weekly or monthly profit, put that money in other less risky investments, or simply save it or use it for a living. The larger the trading account, the more quickly it will be possible to earn money and make significant withdrawals.
In the beginning, don’t diversify too much. For instance, focus only on up to two stocks or two currency pairs. Setting limit orders for both buying and selling is a must. It’s a crucial risk management tool.
As a new stock trader, stick to the mid-day trades. The market tends to be more volatile at stock exchanges’ openings due to increased trading orders.
No matter which asset you choose for trading and investment, be realistic from the very start. All of these markets come with the odds to make a lot of money and carry the risks, just as every business.