Trading the Markets

Forgive me if I am biased to this skill of Trading , but sheer advantages and thrill of this field is beyond me. In this page , I’m gonna be sharing foundational knowledge you need to know about this skill.

1..2..3..Let’s Go !!

Trading is a world in itself. Although this skill is enough to give you thousands if not millions of $$$ , it is like any other field. Don’t make mistake of thinking that it is a game of gamble and it’s easy to make money.

Thumb Rule – If it’s easy , Don’t make an effort , simply move to difficult but rewarding skills ,So people actually need YOU to perform that skill and pay you for it. They can do easy tasks by themselves. I’m not giving you a rosy picture , you may even leave the blog , but reality is , that Trading is one of the most difficult skills to master.

Once mastered, you will not be able to settle for anything else. Trading gives you comfort of earning money from your home , and yes , without need to find the customers !! Remember ??

Why do I keep reiterating the CUSTOMERS point ! Let me explain –

Some heavy load information coming through , bear with me, all your doubts will be eventually answered.

Let’s say you A , wants to buy some shares of Google. To buy and sell on stock market , you need to have a middleman , known as Broker , who will transact on your behalf. Yes, You cant do it yourself.

This is the middleman between you , the buyer and the Exchange ,which is nothing but a marketplace. You tell broker,

Hey man , I want to buy some shares of Google as investment. Please do so. Your broker will place an order with Exchange , the marketplace. With power of technology and god , Exchange immediately finds a seller willing to sell you those shares and at price you mentioned to your broker to get the shares at.

Seller sells you share , and you buy it. The broker earns a Brokerage for his role. You can continue to keep those shares for as long as you want , from 1 sec to your last breath. And can sell anytime.

So, with basics set , Lets extrapolate this is today’s time.

These days , brokers provide you a Terminal , which is nothing but a software for you to use. Instead of telling your broker directly what to buy or sell , you enter the terminal/software of your broker ,and place order yourself. See the difference , although trade is still through broker’s software , but you are now trading indirectly via him with certain degree of independence.

Also , I have not detailed about an amazing aspect , which I think will be a little confusing for a complete beginner to understand . This relates to you making money not only when price increases , but even when price falls.

Such scenario where you make money on falling price is called SHORTING in trading parlance. When you make money via increasing prices of shares , it’s called going LONG. To have detailed information , kindly use web to find more information regarding this . Alternatively , comment down below if you want me to start a series regarding the same :).

Types

There are many types of trading , but what mostly aspires awe are

  • Day Trading
  • Swing Trading

These types of trading as name suggests, are classified based on time period of you holding your shares with you.

In Day Trading , you buy share at cheap price , and sell at high price the same day. Thus making an INTRADAY profit. Such type of trading is usually more difficult than all other forms. But people are awestruck because of sheer possibility of making huge money in matter of minutes or hours. You can try this too , however , only with requisite knowledge and experience.

Swing Trading is a method where you ride the swing . Swing can last from upwards 1 day to months. You need more capital/money to do such trading but it is lot less risky . Swing is nothing but a sustained price movement in either direction , up or down. We know , shares prices move up and down. Each spell during which their price moves up is a swing , same is a down swing for down movement of price.

Day vs Swing -Trading

Techniques

In trading world , there are 2 types of knowledge you can acquire to make money. Both approaches are beneficial , however 1 is preferred by small traders (also called retail traders) like you and me , and other by large traders ( which include traders like pension funds, banks called Institutional Investors).

  • Fundamental Analysis
  • Technical Analysis

Fundamental Analysis – Everyone has heard of Warren Buffett , billionaire owner of Berkshire Hathaway . He belongs to this class. Fundamental analysis is analysis of fundamentals of a business . General meaning includes pulling up Balance Sheets and Profit and Loss Statements of a business , and analysing figures contained therein ie assets,liabilities , cash flow, profits , revenues , payrolls etc.

The general understanding is that such analysis and study is used by investors looking at long term. They are called not traders , but Investors . They do not trade shares , rather invest in them trying to make money by way of CAPITAL APPRECIATION rather than a simple price increase preferred by traders like us.

They look at Macro picture ,form part of Boards of companies because of their investments , get dividends etc. You get it right?

Technical Analysis – Such analysis is used by small traders like us. This type of analysis is based on numbers , indicators ( that indicate when to buy or sell ) , averages , charts , patterns etc. You might be confused , but Technical Analysis is a vast and unfathomable field of knowledge with millions of books on the subject.

95% of traders use technical analysis to make money in stock market , and hence , it is a hugely popular field.

Back to my question , Why do I say we don’t need to find customers? Does it mean we don’t need customers ? Let’s answer these now !

Fundamental vs Technical -Trading
Here’s a quick comparison.

Do we need customers in Trading?

Yes ! We now know that when you buy shares , there is someone selling you those shares at price you wanted to buy them at. So at any point , there are 2 parties involved in any transaction – Buyer and Seller

Similarly , when you sell shares , there is a buyer willing to buy from you at price you want to sell shares. So there is buyers price , that buyer want’s to pay , and then there is seller’s price , that seller want to get for shares sold. When these prices are same , hence match , Exchange executes order for you and seller. Think of Exchange like Tinder but for stocks , preferences of buyer and seller match , and a MATCH is made.

Also , any profit (like when share price increase above your buy price ) or loss (vice-versa ie when falls) is loss and profit of another party.

Thus if buyer is at profit , seller is making a loss equal to profit buyer is having. Lets say you A , bought a share at 10$ , price increases to 17$ , you decide to sell share at profit of 7$ , and therefore sell share to someone looking to buy share at 17$ . Such buyer , when buys share from you for 17$ , buys share at an already high price (17$) than you, thus incurring theoretical loss of 7$ , which was also your profit.

Hence , you actually need other party to buy/sell from you to make money.

Do we need to find customers in Trading ?

No , you see , Exchange is an automated marketplace. Just like on Tinder , people are looking to get a date and state their preferences , Exchange is place for people looking to trade shares buy quoting their preferences (prices).

However , Exchanges takes it one step further. It becomes a premium matchmaking service , sort of Marriage Bureau like in India. These places match brides and grooms according to preferences they have told bureaus.They have huge list of brides and grooms , and match most favorable ones.

Exchanges too , are a place where you simply quote your preferences aka prices you want to buy and sell at, quantities of shares etc. Exchange automatically finds corresponding party and gets your order executed. If the counter party (buyer/seller) is not available , your order won’t be executed. Hence it is one of a kind skill . Use your knowledge without worrying about whether you will be able to get customers via freelance websites or not!!

Conclusion

Forgive me if I was too generic about information provided , but the blog was written keeping in mind absolute beginners. If you want to have advanced knowledge about the skill , kindly comment and I can start a series that will help you making your first few 100 $ within 15-20 days.

Yes , it is risky , but please trade only with sufficient practice. The first time I traded , I lost about 500$ , a big amount for me then. Hence , its not get rich quick skill .

If you want me to keep writing on advanced knowledge , Please comment and I will start a Technical analysis series containing topics like Bar Trading , Pattern trading , Basic Technical Analysis , Averages , Candles , Indicators , Point and Figure Trading , Harmonics and much more.

To go back to Success Blueprint , Visit Here .

Also , I’m willing to provide free books to anyone interested. Kindly subscribe to newsletter to keep receiving free books. All books are available on amazon for purchase. But since we are here for learning , I’m gonna be sharing them , hope it doesn’t land me in trouble.

See ? Each of above topics is an ocean in itself !! So there is a lot to learn , but only if you want to. Comment and Share!!

Your Friend , Your Guide.

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