Trading has developed a polarising reputation, thanks to its association with high-risk, boom or bust deals, and the fallout from several recent recessions. Then, there are the references to popular culture — whether Gordon Gekko in Oliver Stone’s Wall Street or Jordan Belfort in Scorsese’s Wolf of Wall Street.
So murky has the world of trading become that many casual observers brush it off as little more than glorified betting — leaving you with far more of a chance of losing your money than earning any.
However, while somewhat understandable, this perception tells only half the story. Trading is a highly lucrative skill that can be enormously useful for an individual to learn. While trading was long the preserve of qualified traders who worked for large, long-standing finance companies, the onset of digital assets and online trading platforms has allowed anyone with a little spare cash to try their hand at trading.
Despite the trading barriers being removed for everyday people, it is worth remembering that just because you can trade right off the bat, doesn’t mean you should.
Trading with your own money can soon descend into betting if you have no experience, specialised financial knowledge or understanding of why you are trading a particular asset class.
Read on to understand what you need to know about trading before considering it.
Build Foundational Financial Knowledge
The first step you need to take if you want to develop your financial knowledge base is to develop your understanding of money and the various financial asset classes.
While this sounds blindingly obvious, you’d be amazed how many qualified investors and traders have little working knowledge of the economy, how money circulates, and what the various asset classes are.
This is why you are at an advantage as an individual. You are not limited to a particular asset class or industry, only able to concentrate on it and learn more about it.
You have the global economy at your fingertips, meaning that you can adapt faster to changing market trends and trade the hottest commodities around the planet.
For example, you can learn more about emerging asset classes like digital currencies. By jumping down the rabbit hole and understanding the various cryptocurrencies, you can stay ahead of market trends and make informed trading decisions.
If you want to keep track of popular cryptocurrencies, like Terra Luna, then you should use a price index of Terra (LUNA).
Question Why You Are Doing It
Trading has developed such a mixed reputation because many people treat it as a get-rich-quick scheme.
This is a dangerous target to set yourself, because you will end up making rushed or uneducated trading decisions, likely losing money as a result.
Instead, you should clearly understand why you are developing trading skills (even if it is to ultimately make money). Being honest with yourself will help you create a clear target to aim for and prevent you from being confused or overeager about your trading strategy.
Have a Precise Time Horizon or Target
Talking of targets, you need to set yourself a precise goal to aim for. This could be the budget for a new kitchen, a brand-new car, or the money to pay off your mortgage. Whatever it is that you ultimately want to achieve with your trading strategy, spell it out in black and white.
This way, you won’t become too greedy by trying to overstretch and achieve your goal too quickly or becoming overwhelmed and forgetting why you wanted to start trading in the first place.
