Online trading has become easily asses sable to anyone who has access to a computer and an Internet connection with the possibility to trade almost any market in the world from anywhere.
I have no doubt that many people either heard about trading online before or have even tried their hand at making some money in stock, commodity or forex markets for themselves.
Those who have tried trading before most probably found out that it is not as easy as they thought and this should come as no surprise because with the ease of access to the world of trading so too came the online scams that try and flog everything from the next best trading system to the next best course. They all come with one promise; to make a lot of money in the shortest period of time in the easiest way possible.
Whether you have tried and failed at trading or never traded before, one thing is certain: cryptocurrencies has ignited the interest of people the world over, after it’s meteorological amount of attention In the news and in public conversations.
The truth is that only the minority of people who believed in the power of cryptocurrencies or were brave enough to risk some money on it actually profited from it, assuming that they bought into Bitcoin at cheap prices and sold at the prices we see now.
The majority of people on the other hand who were non-believers are certainly kicking themselves now and counting the money they “could” have made. That is the reality of trading; you need to risk money to make money. It is never too late to get involved though but many people do not know where to begin or think that the technology behind cryptocurrencies is too complicated.
That’s why we are here today, to show you and guide you through the basics needed to engage with this new marketplace that is changing the way we think about money.
Exploring the Financial Markets
Before we get into trading cryptocurrencies we would need to lay some groundwork first and discuss what financial markets are, so the we familiarise ourselves with the terminology used in the marketplace. When it comes to trading, all terminology remains the same across all markets.
What is a Financial Market?
A financial market describes any marketplace where people can trade a wide variety of financial instruments such as equities, currencies, bonds, commodities etc. at what they perceive to be value and at prices that reflect supply and demand.
“In economics, typically, the term market means the aggregate of possible buyers and sellers of a certain good or service and the transaction between them”. – Wikipedia
An exchange is an organization that facilitates the trade of financial instruments and can be either a physical exchange like the JSE or NYSE or an electronic system like the NASDAQ. The foreign exchange market (Forex) is a global decentralised market for trading currencies and by far the largest market place in the world.
Cryptocurrency exchanges on the other hand are online websites that facilitate the buying and selling of cryptocurrencies therefore creating a market place to do so.
A broker is an individual or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed.
Trading Financial Markets
Simply put: trading involves the buying a d selling of financial instruments in the hope of making a profit. There are main ways to attempt making money in the markets by either using a longer term investing approach or a shorter term trading approach.
Demand refers to the amount of a product or service desired by buyers. More demand equals higher prices.
Supply represents how much the market can offer. More supply equals lower prices.
Bulls are of the opinion that the markets they trade will be moving in an upward trajectory .
Bears are traders who hold the opinion that the market they follow is going to move in an downward trajectory.
A chart in trading is a visual representation of price movement over a certain period of time. Time is displayed on a horizontal scale below a chart and price on a vertical scale to the right or a chart.
The most basic type of chart is the line chart, which is plotted using a continuous line that is calculated using the closing prices of an instrument over a set period or timeframe.
Bar charts show more information than a line chart and are displayed with vertical l that include the opening price to the left and a closing price to the right .
Each high and low of a bar shows how high or low price went during the time period the bar was set to . Information should be read from left to right, just like you do a book .
Candlestick charts have their origins from Japan over 300 years ago . They are perhaps the most popular chart type used by traders today . They display the exact same information than the bar chart but instead their "bodies" are coloured in to visually display price direction over a set time frame.
A time frame displays the price action of any given instrument over a set period of time and will be the time needed for each bar/candlestick to complete.
Click to Continuous >>> Trading Terminology & Trends Part 2
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