What You Should Know About Trading

How much do you know about trading? What You Should Know About Trading? Find out the 7 types of trading you can make money from.

Just because something does not depend on you does not mean you cannot make money on it. What you should know about trading is crucial to determine whether your trading can be profitable or not. Traders understood this truth a long ago, and they make a fortune on price fluctuations of valuable assets. However, their activity cannot be called simple because trading is not a casino, where everything depends solely on your luck.

What You Should Know About Trading

Trading is a science that combines economics, mathematics, and probability theory. Successful traders calculate their every purchase and sale using various tools, such as the Forex calculator that you can find on fbs.com. We are going to tell you about such a complex activity as trading.

Types of deals

Transactions among traders are divided into short and long. Their difference is as follows:

• in case of short transactions, an asset borrowed from a broker is sold to buy it later at a lower price, the debt is repaid, and the difference in price is deposited in the trader's accounts;
• long trades involve buying an asset to later sell it at a higher price – this price difference is the trader's income.

At the same time, the names of the transactions are in no way connected with their duration or the period of holding the asset – they can last for months or be made several times a minute.

Types of strategies

Trading strategies can be divided into trend trading and news trading. Their differences are as follows:

• in trend trading, a trader opens transactions in the direction of price movements – as a rule, this is an ideal option for a beginner since this is a simple strategy with minimal risks and the possibility of making big profits;
• In news trading, the fundamental analysis is carried out first, and then deals are opened for multidirectional trends – this is a rather nerve-racking strategy that requires exceptional analytical skills.

This is not an exhaustive list of strategies. Experienced investors never stick to one style. They change and combine strategies depending on forecasts, market conditions, and a specific type of asset.

7 Types of Trading

There are several types of trading, among which the seven most common are the following:

• scalping;
• trading in the medium term;
• trading on long-term timeframes;
• instant trading;
• technical trading;
• fundamental trading;
• high-frequency trading.

Let's consider each of them in more detail.

1. Scalping

Scalping is trading in which the trader receives a small profit from each price movement. It requires constant and painstaking work of the investor since it is necessary to work on the shortest timeframes (for example, one minute).

2. Trading in the medium term

Trading in the medium term is the most optimal variant for beginner traders; calm and less risky than scalping. The profit/loss is formed from the movement of prices on periods equal to one hour, several hours, or days. During this time, you can soberly analyse the data and choose a strategy.

3. Trading on long-term timeframes

Usually, it is about a week or a month. The main emphasis is on analysing economic processes, external factors, and market movements. As a rule, it is chosen by large capitals – corporations, banks, and other financial institutions.

4. Instant trading

It assumes that the trader combines trading on different timeframes. This is a rather rare type of trading, but it is still practised in some cases.

5. Technical trading

A trader trades on any time frame based on technical analysis, predicting the likely price change based on how prices have changed in the past in similar circumstances (this is called trend analysis).

6. Fundamental trading

The trader works in the medium term using fundamental analysis, that is, the analysis and prediction of the issuer's market value based on the companies' performance.

7. High-frequency trading

This type of trading is carried out not by people but by powerful computers that perform up to several million computing operations per second to close a deal with maximum profit. This new and developing tool is nevertheless subject to attacks and periodically damages global stock markets.

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