How to learn trading from scratch

The word trading comes from the verb “trade” and means making transactions with securities, goods or currencies in order to make a profit.

Traders are called participants in exchange trading, earning on exchange rate differences.

Investors are those who are aimed at obtaining benefits in the future by investing (investing) financial resources.

A broker is a company that provides individuals and legal entities with access to stock exchanges.

A personal advisor is often an employee of a broker or other financial institution. He does analytical work for the client and can give investment advice or develop a complete investment strategy.

Trading types

Depending on the strategy used and the duration of transactions, trading is conditionally divided into several types.

High frequency. All operations are performed by a computational algorithm. In accordance with a given program, he places a lot of orders – orders for buying and selling (from the English high-frequency trading, HFT). All transactions are carried out in seconds or even faster. It follows that a high-frequency trader must have knowledge of trading algorithms and programming skills. In addition, such a strategy is very risky. It requires high material costs for appropriate equipment and provision of dedicated Internet access. A good communication channel is a prerequisite to avoid any time delays during the trading session. This trading strategy is not suitable for beginners.
scalping. Transactions, as in high-frequency trading, are carried out for short periods of time, but last longer – from several seconds to several minutes. Scalping is also based on a certain strategy, according to which a trader filters out securities with the required volatility (trading volume) and other specified parameters. The purpose of transactions is to withdraw a small profit in each trade.
Day trading. As the name implies, the trading period in this case is a day. The trader conducts transactions manually. Current positions require constant monitoring, since they should all be closed before the evening. This requirement is also related to the peculiarity of trading – the use of a broker’s leverage. The discount not only allows you to increase profitability, but also significantly raises the risks. Therefore, the commissions of brokers for the use of borrowed funds overnight (until the next day) are quite high and can reduce the expected profit from the transaction to nothing. Methods for conducting day trading on the Moscow Exchange differ depending on the type of instruments used. The strategy can be based on indicators and technical analysis signals, as well as price fluctuations due to the influence of the news background.
Swing trading. For this type of exchange trading, the period for concluding a transaction can last several days. Swing trading relies on technical analysis of charts, recognizing price fluctuation cycles and making the most of those movements. It requires deep knowledge, strict discipline and a clear strategy for making decisions on opening / closing a position and intermediate profit taking. As part of this strategy, the trader tries to minimize possible losses by constantly adjusting stop orders (orders that will be executed if the price starts moving in the opposite direction to the open position).
Medium term trading. Designed to capture significant price fluctuations and earnings on trends (long-term unidirectional movements). Here, a trader cannot do without both technical and fundamental analysis. The decision to open a position is made on the basis of data on macroeconomic factors, information on the state of the economy of the country, industry, reports on the activities of the company and its competitors. This type of trading is similar to long-term investing, but differs in duration.

You can start your acquaintance with trading by learning scalping and day trading. These types are most popular with beginners, as they do not require large investments and complex special knowledge. As experience accumulates, a trader determines what is more interesting to him and delves into a specific area.

Studying the trading terminal and applications

In trading, a trading terminal acts as a tool for accessing the exchange. To make a trade quickly and accurately, a trader must be aware of all order types available in his program. It is worth exploring the possibilities of using hotkeys to quickly open the desired windows and tabs. This will save you a lot of time and make your job easier. You also need to pre-configure the interface for your purposes.

In our country, the two most common terminals are QUIK and MetaTrader. Separate training video courses are devoted to each of them, and regular free seminars on configuration and usage features are held.

However, studying the theoretical part is not enough. Only practice will help you understand what functionality you need and how best to place it on the terminal. For these purposes, some brokers provide access to a demo account. Here, trading with virtual funds, you can both test the strategy and test the trading platform.

Trader’s skills

To become a successful trader, desire alone is not enough. People come to the stock exchange with burning eyes and a great desire to earn money, but many leave with nothing. Why is it so? Psychology plays an important role in successful trading. Knowledge about the technical side of trading does not insure against errors and distortions in the perception of reality when opening a position. Therefore, let’s see what skills a beginner needs to develop in himself in order to become successful in this business.

Discipline. The job of a trader is hard work. Before the opening of the next day of trading on the stock exchange, a beginner should have time to do a lot: to analyze completed transactions, if necessary, adjust the strategy for the next day, study additional information, choose an assumption to check. In order to have enough time for all this, it is important to observe strict time management. During the day, you need to stay focused and not lose focus.
Stress resistance. It is impossible to make only profitable trades. Everyone who wants to learn trading should come to terms with this thought. And since human psychology has a tendency to perceive the loss of a certain amount as twice as hard as gaining it, it is not surprising that most people quickly quit trading on the stock exchange without having achieved success. Understanding that every mistake is an experience is given to many with great difficulty. The good news is that resilience can be trained.
Rationalism. There is no place in trading for such words as “I think” or “I believe”. A good trader can always explain why he opened a position and why he exited it. For this, he must have an absolutely unemotional logical reason, based on knowledge, strategy, and not on faith or intuition. Careful selection of ideas and critical perception are essential skills for a trader.
Ability to make decisions quickly. This is a useful quality that is worth training. Of course, the success of the decision will largely depend on preliminary preparation. But during trading, speed is no less important for a trader. Seeing lost opportunities is no less difficult than bearing losses.

Trading for a beginner is a real full-time job. A certain time must pass until the necessary experience is accumulated to create your own strategy. Further, more free time will appear and trading will enter a stable rhythm. But a trader should never forget that the market is constantly changing: what worked today may stop generating income tomorrow. Therefore, those who have made trading their profession are constantly looking for new options and strategies.

Anyone can become a trader. This job has many benefits:

  • – earnings opportunities are unlimited;
  • – distant work;
  • – free chart, tied only to the trading session;
  • – lack of leadership.

But there are also disadvantages:

  • – high risks;
  • – lack of stable income;
  • – no social security;
  • – high stress factor.

 

What is important

In the minds of many, the typical trader is like a millionaire in a movie who does nothing but spend his huge fortune and work a couple of hours a day. Yes, this is possible, but not immediately. Heights are reached only by the most stubborn and persistent, ready to put a lot of effort and energy into the cause. In principle, this is the secret of success in any business.

(RU) Как научиться трейдингу с нуля

Слово трейдинг происходит от английского глагола trade (торговать) и означает совершение сделок с ценными бумагами, товарами либо валютами с целью получения прибыли.

Трейдерами называют участников биржевых торгов, зарабатывающих на курсовой разнице.

Инвесторами называют тех кто нацелен на получение выгоды в будущем путем вложения (инестирования) финансовых средств.

Брокер — компания, предоставляющая физическим и юридическим лицам доступ к биржевым площадкам.

Персональный консультант часто является сотрудником брокера или другой финансовой организации. Он проводит для клиента аналитическую работу и может давать советы по инвестированию или полностью разрабатывать стратегию вложений.

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options

The difference between binary and stock options

To begin with, it is worth understanding that there are real options, these are stock options that are traded on the derivatives market, for example, on the Moscow Exchange. There are also so-called binary options that have nothing to do with exchange trading. Accordingly, many of the fears of traders regarding the loss of money are associated with the concept of binary options, which can often be seen on the Internet. Let’s take a look at what is the difference between binary options and ordinary options, that is, stock options.
There are a number of markets on the Moscow Exchange, and the most famous of them are stock (stocks, bonds, shares), foreign exchange (conversion of different currencies) and futures (options and futures contracts).

An option is a contract for the purchase / sale of the underlying asset (the underlying asset for options are similar futures) until a certain date in the future on the terms specified in the specification of the option contract.

In fact, traders on the Moscow Exchange use these tools for various purposes:

• to insure positions – both in stocks and the portfolio as a whole, in futures;
• to make money on a non-linear market change — with the help of options, you can earn on a price not leaving the range or on a sharp impulse in any direction, as well as in many other situations;
• to make money on directional market movement – if the market is rising or falling.

 

There are a huge number of options for dealing with stock options, and each of them requires a different level of trader’s training. We advise beginners to first start studying stock options from the moment they buy their first share, since this tool allows you to insure, or, as stockbrokers say, “hedge” risks.

 

For example, if a futures on Sberbank shares (futures are the underlying assets for options) costs 14,750 rubles. When buying it, you do not know at what price you will close the deal (sell the futures). But by buying a put option (the right to sell a futures on Sberbank at 14,750 rubles for a month for 460 rubles), you insure the position in advance – if the futures price falls, you can sell it at the purchase price. But for the possession of such a right, we pay 460 rubles. And since the dynamics of the futures very often repeats the dynamics of the stock itself, it is possible to hedge both the stocks and even portfolios of securities with options.

 

In addition to the function of exchange insurance, options also perform another one – they allow you to earn on the movement of the asset price in a certain direction (up or down). So, if the value of the underlying asset is 14,588 rubles, you can buy a call option (opportunity to buy) at 14,500 strike for 473 rubles. For you to be able to earn, the asset must rise above 14,500 rubles by the value of the option before the expiration date. Everything by which the asset rises above 14,973 rubles will be a profit on the option. If the growth does not take place, then the maximum loss is the value of the option. Similarly, if we buy a put option for 385 rubles at a strike of 14,500, then in order to earn money, the price of the asset must decrease below the specified strike by the value of the option, that is, to 13,730 rubles. Anything the asset falls below will be a profit.

 

Options allow you to make money on non-linear price changes, but such option designs require more experience. Knowledgeable traders say that it is not worth allocating more than 10% of the portfolio for this kind of work. So, if the asset is worth 94,050 pp., then you can buy both a call option (for the right to buy) and a put option (for the right to sell) at 95,000 strike (the right to deal at a specified price) for a week for 990 and 1940 pp. respectively. In this case, in order to earn money, the asset must either rise above the 95000 price level by the maturity date of the options (expiration) by 2930, or fall below the specified value. Therefore, it is not so important in which direction the asset will go – it is important that the movement is powerful.

It turns out that working with stock options is very diverse and goes well with building a portfolio of securities, complementing it and helping to control risks.

Binary Options

The first trading in binary options took place in 2008 in the USA with the participation of CME and AMEX. This type of option involves receiving a strictly fixed profit if the condition (growth or decrease) above/below the specified level is met and a loss in the amount of the option value if the condition is not met before the option maturity date. “Trades” in this type of options soon began to organize various “kitchens” (companies that do not list transactions on the exchange, but make “bets” on the value with their clients). And soon the SEC began to prohibit trading in such instruments, since the transactions were not displayed anywhere, and the companies – “kitchens”, of course, did not have the necessary licenses to create such financial products. And these bans were carried out not only in the United States, but also in a number of countries, such as Canada, France and Israel.

On the one hand, the idea of binary options allows you to clearly control the possible profit and loss. On the other hand, it allows the organizers of the auction to calculate the cost of the option in such a way that it would be unprofitable to buy it in the long term due to profit limitation.

Trading binary options has nothing to do with real stock options. Not a single binary option is traded on the Moscow Exchange. Another significant difference between an option and a binary option is that when working with binary options, a trader is offered to trade only them, which entails not a risk of drawdown, but the risk of losing capital. If the condition is not met, the option is completely depreciated, and the very principle of using options to control risk and replenish the portfolio becomes violated, which is extremely unfavorable for the trader.

The difference between binary options and stock options is obvious. Options are a portfolio complementary tool that helps control risk and maximize returns. But in order to use options in this way, they must be real – stock options.

(RU) Различие между бинарными и биржевыми опционами

Для начала стоит понять, что есть настоящие опционы это биржевые, которые торгуются на срочном рынке, к примеру, на Московской бирже. Еще есть так называемые бинарные опционы, не имеющие с биржевыми торгами ничего общего. Соответственно, многие опасения трейдеров, касающиеся потери денег, связаны с понятием бинарных опционов, которые можно часто увидеть на просторах интернета. Давайте разберем, в чём состоит отличие бинарных опционов от обычных, то есть биржевых.

На Московской бирже представлен ряд рынков и наиболее известные из них — фондовый (акции, облигации, паи), валютный (конвертация разных валют) и срочный (опционные и фьючерсные контракты).

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