Know your own means
To go hunting without knowing how a firearm works or what actually happens during a hunt… would you ever do it? If you don’t fear that some unpleasant incident might happen you probably would. If , on the other hand, you cherish your skin , you will probably first want to know how to use a rifle perfectly and know how to aim well.
Trading without knowing what is really going on and what the tools you use would turn out to be just as risky for your finances.
Understand what a broker is, how the dynamic and fascinating process that involves actors all over the world works, divided into two perpetually distinct and complementary factions, the buyers and the sellers. It is from these two eternally confronting divisions that market movements arise , and knowing their the dynamics is one of the fundamental building blocks on which to build future technical skills in this area.
Like any field, to be mastered and to grasp its nuances, one must have assimilated the basics to the core.
Sometimes those who approach trading, do not grasp how closely it is linked to the universal law of supply and demand, which globally governs every business sector.
The eternal battle
Entering the market without knowing that the price of an asset rises only and exclusively when demand exceeds supply, requires a general review of the subject.
If it is the constant opposition between these two forces that moves price, a distinctly bullish market is a sign of an imbalance in favor of buyers. In other words, the asset whose chart you are looking at is attracting interest.
However you look at the matter, the question is always the same. Who will prevail at any given time?
This is the dilemma that investors globally regularly agonize over.
Some might think that the answer is complex and influenced by a number of factors, such as macroeconomic events, geopolitical events, market sentiment, the level of inflation and interest rates, the maturity of futures contracts and investor behavior, etc. etc,
But this is not true… in reality trading is you , it is you looking in the mirror. Trading amplifies and highlights all your reactions, emotions, fears, desires in a perpetual game of discipline, strategy and above all values and mindset.
Regardless of whether you trade manually or algorithmically, you are always in charge, and the performance you get depends only on you, and not on the market.
Trading is where it is easier to build alibis about one’s results, as it is very easy to say, ah there was the FED announcement, or an unexpected attack and so I lost the game.
A soaring inflation rate can lead to a decline in the value of the currency. Similarly, growth in a country ‘s GDP generally leads to stock market development; the outcome of anelection could increase demand for the dollar, just as a new agreement between states could reduce the demand for gold. Nothing will ever be predictable in detail, so the challenge of the successful trader is to put the various factors together to get a picture overall picture that reduces uncertainty as much as possible and put his prediction into practice.
Intermediaries
Another important aspect of financial trading is the role of dealers and various intermediaries who enable the two rival teams to make their trades, causing supply and demand prices to fluctuate continuously.
The bid price constitutes the lowest price at which sellers are willing to sell a good at a given time.
Demand price , on the other hand , represents the highest at which buyers are willing to buy. In English the bid is called Ask and the ask Bid, terms that in Italian find their equivalent in Lettera and Denaro.
Curiosities
The “letter” is the price the seller presents to buyers. The term”letter” comes from the old practice of writing quotations on a black board, where the bid price was written on the left and the ask price (the maximum price at which buyers are willing to buy) was written on the right. The”letter” was thus the first thing seen on the left side of the black picture.
The difference between these two prices, the so-called spread , represents the profit margin for dealers and can vary depending on volatility, liquidity and market competition.
Summing up
Trading is a system structured on a multitude of variables that to be tamed requires a combination of techniques and knowledge that only proper training can give.
If you would like to learn and learn more about this fantastic industry, wait no longer and schedule an appointment with one of our consultants.
