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You may have met him during a televised report on the Jérôme Kerviel affair. Or maybe it was in one of those many highly touted ads that abound the Internet? Or on LinkedIn, in a job offer of the most serious for a bank of the most prestigious?
In fact, you do not know very well when or how you discovered it, but you know one thing: Trading makes a lot of ink. Or rather, to be quite accurate, Trading activities are a big deal; because behind this generic term " Trading " is actually hiding a whole lot of different activities and nuances that we will discover together.
There are many misconceptions about trading, and the false promises made to individuals on this topic may be even more numerous ... Through this information, we hope to contribute modestly to correcting some misconceptions about trading.
What is Trading?
In its primary sense, Trading refers to the activity of buying and selling assets and financial products.
Among the financial assets traded by the Trader are shares - title deeds corresponding to a fraction of the capital of a company, bonds - debt securities corresponding to a share of debt issued by a company or a State, currencies, or the raw materials.
What you can do to become a better trader
Start with a Practice Account
Every new trader should trade using a practice account, and only ever risk real money when they are making consistent profits in the practice account. Use your practice account to try out different strategies and see what works for you. Try trading important economic events and see if you’re able to avoid massive losses
Forex trade, consider the following two examples.
Let's say that the current bid/ask for EUR/USD is 1.4616/19, meaning you can buy 1 euro for 1.4619 or sell 1 euro for 1.4616.
Suppose you decide that the Euro is undervalued against the US dollar. To execute this strategy, you would buy Euros (simultaneously selling dollars), and then wait for the exchange rate to rise.
So you make the trade: to buy 100,000 Euros you pay 146,190 dollars (100,000 x 1.4619). Remember, at 0.5% margin, your initial margin deposit would be approximately $731 for this trade.
As you expected, Euro strengthens to 1.4623/26. Now, to realize your profits, you sell 100,000 Euros at the current rate of 1.4623, and receive $146,230
As you expected, Euro strengthens to 1.4623/26. Now, to realize your profits, you sell 100,000 Euros at the current rate of 1.4623, and receive $146,230
You bought 100k Euros at 1.4619, paying $146,190.
Then you sold 100k Euros at 1.4623, receiving $146,230.
That's a difference of 4 pips, or in dollar terms ($146,190 - 146,230 = $40).
Total profit = US $40.
Now in the example, let's say that we once again buy EUR/USD when trading at 1.4616/19. You buy 100,000 Euros and you pay 146,190 dollars (100,000 x 1.4619).
However, Euro weakens to 1.4611/14. Now, to minimize your loses you sell 100,000 Euros at 1.4611 and receive $146,110.
You bought 100k Euros at 1.4619, paying $146,190.
You sold 100k Euros at 1.4611, receiving $146,110.
That's a difference of 8 pips, or in dollar terms ($146,190 - $146,110 = $80)
Total loss = US $80.
Good