Many people want to get started with short term trading, but what they don’t know is that you can’t just jump right in and expect to be successful. There are many pieces of information that are necessary for success. And although some of them might seem like common sense, this is often overlooked because they can be deemed as “too simple.” Instead, what a lot of people do is to jump right to more advanced topics like strategy. Strategy is important for sure, but it’s not the first thing you should be focused upon.
Instead, familiarize yourself with the basics, master them, and then form a more complex strategy around them. This will take you much further down the road of creating a highly profitable trading career.
Let’s take a look at some of the things that you will need to master before you focus on finalizing a strategy.
There are certain hours that certain assets are traded during. If you aren’t available to trade during those times, you will have difficulty getting started. For example, the U.S. stock market is open from 9:30 am to 4:00 pm on Monday through Friday, Eastern Time. Trading stocks and indices outside of those hours is possible, but very difficult, especially if you are trying to do so over the short term. The margin of error goes up at a very high rate.
Trading the U.S. dollar during these hours is possible, too. However, there are other currencies out there, and knowing when these are traded the most will give you an advantage. The three biggest currencies besides the dollar are the euro, the Japanese yen, and the pound sterling, out of Great Britain. The euro and the pound are traded during European trading hours, usually ranging from 9:00 am to 5:00 pm, or 3:00 am to 11:00 am in New York City. Tokyo’s trading hours are even more inconvenient if you live in the United States. Those start at 8:00 pm the night before. These are the peak currency trading hours, as they are when the most people are trading, and thus prices move the most quickly. Commodity hours tend to be similar, depending on the time of year. If you are trading in Singapore you have similar time frames as Japan. Just make sure you work with what’s best for your schedule.
Most people don’t begin to realize that they might be trading in another nation before they begin. At that point, it can already be very inconvenient. The internet has made our world seem very small, but that doesn’t mean it really is. Instead, if you are trading the USD/JPY pair, but it is not during peak hours in New York or Tokyo, you will be struggling because these currencies don’t move as quickly during European hours. Knowing which markets to trade in will help you to speed things up with your learning process. It will also help you to keep focused.
This is especially true of stock trading. It is possible for a U.S. based trader to trade European stocks, or vice versa, but this can be tough to set up. Trading with binary options makes this a lot easier, but you will be limited to the biggest stocks and indices out there. This isn’t a bad thing, though. In fact, in most cases it allows you to streamline and specialize your focus, giving you a higher correct trade rate over the long run.
Picking a Strong Broker
Every trader is looking for an advantage in the market. Some brokers will give you the heads up when good trades are coming. As long as you keep you money in multiple accounts you should be in good shape. Brokers such as 24option and HighLow will give you the required education. Without the right broker knowledge you will fall behind the crowd.
Once you know what to trade, and when, you can focus on strategy. News trading is a powerful strategy, especially for beginners. It allows people without a lot of experience in technical trading to make big profits because of the fact that it relies more heavily on market psychology than how to interpret a graph. It is most useful over the very short term, which again, gives an advantage to binary options traders. Short term day traders can also use this, but the fees associated with this can add up very quickly and eat away all the money made. It’s a simple strategy: when something happens in the news, make a trade anticipating the direction that the news will take a specific asset. Making the right binary broker choice will be important if you decide to trade this way.
Trading with fundamental strategies is a step more advanced than trading the news. Here, you are looking at the health of a company or a commodity and making a decision based upon that information. Using the SEC required paperwork for U.S. based stocks and indices is a good place to start, and many sites will consolidate this info for you. Fundamental trading tends to be more long term, which is great for position traders in the stock market, commodity futures traders, and long term binary traders.