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What is a Trader and Trading?
A trader is someone who plays a role in the sale and purchase of a financial asset in the financial market. The person can and is able to buy or sell the asset for himself and can be for other individuals or institutions. The important difference between an investor and a trader is the duration of his holding the assets he has invested. Trading is the process of buying and selling a financial instrument with the aim of making a profit. The instruments traded range from various assets that are given financial values that fluctuate and you can trade according to the direction they take.
Trade Etymologically
Etymology is the study of the origins of words and how their meanings have evolved over time. The term first appeared in English in the 1580s with the meaning "dealer, trafficker, one who engages in trade". If comes from the verb to trade , which appeared in English in the 1540s. At that time, to trade meant "to tread the path". By the early 1600s, it also meant "to occupy oneself (in something)". It was not until 1793 that the verb acquired the meaning "to barter".Trade (Noun) – To Trade (Verb)
This term comes from the noun Trade and the verb To Trade. Trade refers to the act of buying and selling products between individuals, companies, other organizations, and even countries. When trade occurs between countries, we call it international trade. It can be said that someone who imports and/or exports is an international trader. The verb to trade means buying and selling products or services either on a commercial, individual, or national and international level.Important for you to know about Traders
A trader can work for a financial institution, where he trades with the company's money to earn a salary and bonuses. However, a trader can also trade for himself, using his own money but also keeping all the profits. There are several types of traders who use different trading strategies, including:- Scalping or micro-trading – A scalper makes many (from dozens to hundreds) trades each day, trying to make a small profit on each trade.
- Trading momentum – Momentum traders focus on stocks that move significantly in one direction on high volume. They tend to catch momentum and profit from it.
- Trading technical – Technical traders concentrate on charts and graphs. They use various technical indicators and analyze charts, looking for buy or sell signals.
- Trading fundamental – Fundamental traders focus on fundamental analysis and examine corporate events, anticipating earnings reports, mergers and acquisitions, reorganizations, which may affect stock prices.
- Swing trading – Swing traders often hold their positions for more than a day, trying to catch trends. They use technical analysis to find stocks with short-term price momentum.
Preparation Before Forex Trading to Always Make a Profit
Before reading about how to trade forex profitably, pay attention to the preparations that must be made before you start trading forex:1. The currency pair you are trading
It is very important to understand the currency pairs you are trading. Different pairs behave differently, and you also need to know the market behind the currency, so you can stay informed of important developments in that country.2. The importance of bid-ask spread
The bid-ask spread is very significant in forex trading. It is basically the difference between the lowest bid price and the highest bid price. A higher spread can indicate lower liquidity, and vice versa. So, keep an eye on the spread and plan your trades accordingly.3. Leverage
Leverage is essentially borrowed money, and it can be your best friend or your worst enemy. On the bright side, it allows you to execute large volume trades with a relatively lower amount of capital. But too much leverage coupled with losing trades can make it difficult to repay the borrowed capital.4. Forex trading strategies
There are many different forex strategies that you can consider when trading currencies. From scalping and day trading, to trend trading and swing trading, there are many strategies that you can rely on, depending on market movements and your trading goals.5. Your trading plan
You also need to have a trading plan, so that you can execute your trades objectively, and in a well-informed manner. A plan also ensures that you keep an eye on your trading goals before you buy or sell a currency pair.6. Your emotions and biases
Finally, make sure you keep your emotions and biases out of the equation. The forex market is extremely volatile, and it’s easy to get overwhelmed. But despite the many price movements, it’s important to remain objective and impartial.Check out Tips, Strategies, and How to Trade Bitcoin for Maximum Profit!
Forex Trading Strategy to Always Make Profit
Here are ways to trade forex for continuous profit that you can practice:1. Scalping Strategy
Scalping is like a high-action thriller that keeps you on the edge of your seat. It’s fast-paced, exciting, and mind-bending all at once. Scalping , also known as scalping , is a popular trading strategy characterized by a relatively short period of time between the opening and closing of a trade. This type of trading is usually only done for a few seconds to a few minutes at most! Forex Scalpers The main goal of a forex scalper is to grab as many pips as they can in very small amounts during the busiest times of the day. Scalpers can place up to several hundred trades in a single day , looking for small profits. All positions are closed at the end of the trading day. Since scalpers are essentially glued to the charts , it is best suited for those who can devote several hours of their undivided attention to their trading. It takes intense focus and quick thinking to be successful. Not everyone can handle such fast-paced and demanding trading.2. Day Trading Strategy
A day trading strategy is a multi-layered methodology that is the foundation for your trading. In short, it dictates what and how you trade. A strategy is what will prevent you from the ‘deer in the headlights’ syndrome, where you freeze in a total loss as your account blows up. It will also help you capitalize on familiar patterns with confidence and agility. A strategy allows you to navigate through the market day avoiding pitfalls while exploiting market opportunities. Just as a business has an operational strategy, a trader should have a day trading strategy. This strategy is what separates gambling/guessing from methodical high probability trading. It guides your trading because it dictates how and what you trade. If your strategy consists of only trading small caps, then stay away from large caps. In terms of business, Walmart is a leader in low-cost, high-volume retail. They would not launch a luxury store brand because it would not fit their strategy.3. Swing Trading Strategy
Swing traders try to profit from changes in the price of an asset over a short period of time. They will base their decisions on market trends, using fundamental and technical analysis to identify patterns, trends, and potential trend changes in a short period of time. Swing traders stay invested for a short period of time, such as days and sometimes weeks, before making a deal. They do not follow market trends as often as day traders, but they are quick to identify shifts in trend lines and exit the market before the situation changes to the opposite. They do this by using swing trading techniques.4. Position Trading Strategy
This is a common trading strategy that allows traders to hold and maintain their positions in the stock market for longer than intraday timing. This period can be a day, a week, or even a month. As a result, the potential profit is greater, as is the risk. Position trading can be considered a premium version of day trading. Position traders look to correct long-term trends and make profits without waiting for short-term price movements. Position trading is similar to investing, but the main difference here is that investors who buy and hold are limited to the long term. For example, a famous position trader, Philip A. Fisher was not only a great investor, but he was also followed by many fans, including Warren Buffett, and made great investments by focusing on good companies that provided encouraging data. In 1955, Fischer made a long-term investment in Motorola stock, a position he held until his death at the age of 96. Position trading has become famous over the years because it avoids one of the most significant dangers of intraday trading: the need to equalize transactions before the end of the trading session. Position trading allows one to hold a position for a day or more, weeks, or months, depending on your goals. Position trading does not have a specific period; instead, it can be chosen depending on the nature of the deal.5. Contrarian Trading Strategy
A contrarian investment/trading strategy is a style of trading that involves going against the prevailing market trend in order to make a profit. It is an approach where a trader or investor intentionally goes against the prevailing market trend by selling when others are buying or buying when most others are selling. Such traders look for opportunities to buy stocks that are currently selling below their intrinsic value.6. Sideways Trading Strategy
When the market is trading sideways, volatility is often low. Volatility, or the spread of a stock’s price action over a period of time, is a material component of options pricing. The higher the volatility of the underlying stock, all else being equal, the higher the price of an option on that stock. Therefore, the reduced volatility that is often a result of sideways markets can be traded using options as the financial instrument of choice.7. Trendline Breakout
Trendlines connect several price points over time to give traders an idea of how price might move in the future. Trendlines visualize the general direction of price movement. They also help traders understand the levels that price struggles to break through, namely support and resistance levels. This information tells traders about the likelihood of a trend continuation or reversal. This further helps traders decide whether to go long or short, and when to enter and exit these positions. Breakouts, on the other hand, are price movements outside of an established trend. They indicate short-term or temporary movements against the prevailing trend. These counter-trend moves may only be temporary but can be used as part of a breakout strategy. For more details, click here to find out how to trade correctly!How to Trade Forex Profit Continuously
Before we move on to discussing the most popular Forex trading strategies, it is important for us to understand the best method of choosing a trading strategy. There are three main elements to consider in this process.Time period
Choosing a time frame that suits your trading style is very important. For a trader, there is a big difference between trading on a 15-minute chart and a weekly chart. If you are more of a scalper, a trader who aims to profit from smaller market movements, then you should focus on lower time frames such as the 1-minute to 15-minute charts. On the other hand, swing traders tend to use the 4-hour chart, as well as the daily chart, to generate profitable trading opportunities. Therefore, before you choose your preferred trading strategy, make sure you answer the question: how long do I want to stay in the trade? Different time periods (long-term, medium-term, and short-term) suit different trading strategies.Number of Trading Opportunities
When choosing a strategy, you should answer the question: how often do I want to open positions? If you want to open more positions then you should focus on scalping trading strategies. On the other hand, traders who tend to spend more time and resources analyzing macroeconomic reports and fundamental factors tend to spend less time in front of the charts. Therefore, their preferred trading strategies are based on higher time frames and larger positions.Position Size
Finding the right trade size is of utmost importance. A successful trading strategy requires you to know your risk sentiment. Risking more than you can afford is very problematic as it can lead to bigger losses. A popular tip in this regard is to set a risk limit on each trade. For example, traders tend to set a 1% limit on their trades, meaning they will not risk more than 1% of their account on a single trade.Want to Improve Your Financial Skills? Let's Start Trading at GIC Trade
Improve your financial management skills by starting trading at GIC. Not only trading, you can also learn about forex from scratch through educational videos on the GIC YouTube account, subscribe now and don't miss important information on GIC Instagram. Don't forget to register now so you can start trading on the GICTrade platform!
