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Trading 101: How To Start Trading?

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Why should you trade?

George Soros / Shutterstock

For most of you that might sound like a silly question. After all, it’s hard to argue with the claim that in the quest for financial independence, trading and investing in financial markets are among the most intriguing opportunities. The world of trading is fascinating—the sky seems to be the limit when you encounter all the huge success stories, the Apples, Facebooks, Googles, Teslas on one side, and the great investors and traders like Warren Buffett, Paul Tudor Jones, David Tepper, George Soros, Benjamin Graham on the other side. Also, the technological advance brought this world much closer to the Average Joe, with prompt and cheap online access to all imaginable markets and assets.

That said, despite the great premise, the wild dreams of wannabe traders coupled with the unlimited realm of opportunities often leads to disasters. Without the intent of scaring off anyone, the reality is that a large number of new traders lose some, or all of their initial capital.

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How could you prevent that? Well, the good news is that by trying to get informed and educate yourself, you already took one of the most important steps towards success. Blindly jumping in the market and start “day-trading” on “margin” (we will get to these, don’t worry…) to chase unrealistic gains accounts for most of the horror stories.  Before you leave, we have more good news— by following a few simple rules, you will remain in control all the way, without taking on unnecessary risks or committing some of the all-too-common-rookie-mistakes.

That’s where we step in. In our Trading 101 course, we will go through all the steps that you need to take to trade consciously and successfully. First, we ask you to be somewhat patient and realize that, in order to get closer to achieving your goals through trading, you need to learn some basic skills and acquire crucial knowledge.

You should be looking at trading as any other business that you get into; you have to put in some time and energy in order to get the wanted results. But remember, the possible reward is extraordinary—leveraging your knowledge to manage your capital is the single best way to increase your wealth.

Learning The Language Of Trading

If you look at trading as a business, at first you might think that it’s done in a language of its own. The financial jargon is vast, and often confusing for outsiders. Traders and analysts with very different levels of knowledge use words and phrases in all kinds of ways, sometimes far away from the “genuine” meaning.

What’s worse, there are those who try to hide behind the financial mumbo-jumbo to mask their inexperience, lack of expertise, or use it to profit from the insatiable hunger of the public for news and “expert opinions”. The best way to remain focused in this jungle is to learn the basics, and form your own opinion about the unfolding events and the movements in the market.

It’s a good idea to find reliable sources of information both for educational materials and up-to-date news. Getting informed about the basics of economics and financial trends will also help you in understanding the market and the intentions of the different players.

To help you, we will provide you with a compact dictionary that will kick-start your trading career, and shorten your learning curve. We will also continue giving you all the necessary information about the newest developments in the financial world.

Finding The Trader In You

When you already speak the language of trading on a basic level, you should still answer some questions before you place your first order on the market. If you don’t, you will, most likely, find them out the hard way. Here are some of the most crucial ones:

  • What are your goals with trading?
  • How much capital would you like to trade with?
  • How does trading fit in your investment portfolio?
  • How much time would you like to dedicate to trading?
  • What assets do you want to trade with?
  • What analysis methods would you like to use?
  • What strategy (or strategies) is suitable for your goals?

Of course, these questions are not independent of each other. The time that you are able to dedicate to trading will largely determine the strategies that you might use, while the amount of capital might limit the type of assets that you are able to trade with, and so on.

The idea is to be conscious about your trading goals and to know what you are looking for, even if some of the questions might seem premature, and your answers might be proven wrong later. Don’t worry, you will have several opportunities to refine your approach as you gain experience.

Choosing A Broker

If you have answered the questions, and you already have a pretty good idea of the path you prefer, the next step is to find the perfect partner for you to trade with. In practice, this means finding a good broker (or brokers) and a matching trading platform. As easy as it sounds, there are several filters that you should use before choosing your partner in trading.

The decision is not for eternity too: it’s good to stay flexible and switch brokers anytime in your trading career. This, of course, implies that you should keep an eye on the market for new trends and opportunities, but guess what; we will be here to help with that as well.

So, what are the factors to weigh and what are filters that you should apply?

  • Reputation and regulatory background
  • The available markets, assets, and account options
  • The available trading platforms and tools
  • Commissions and fees, hidden costs
  • Customer support, extra services

Some of these might seem obvious, but there are more to them than you would first think. Reputation might seem boring for example, but that’s only true until there is an extreme situation like the 2008 crisis or the infamous Swiss Franc event in 2015. Even commissions and fees can have different effects on different strategies, making a certain broker expensive for one trader and a bargain for another.

Naturally, your weights will be somewhat subjective, but in our coming posts, we will show you all the must-haves and the “strictly-no-no”-s of the business.

Practice, Practice, Practice…

After you answered the basic questions and found the perfect broker, now you are ready to trade, right? Unfortunately, the answer is most likely no, at least not with real capital. The wise decision for most traders is to start your journey with a demo, or practice account. Most brokers offer those to new traders, while also providing a great opportunity to further evaluate their services. Demo accounts are perfect to get to know a trading platform, the order types, your strategies in practice, and to face all the small decisions that are inherent in trading.

Having said all this, the idea of opening a “real” account together with a demo account is not entirely wrong. An account with a smaller amount of capital could uncover some problems with the broker, the funding process, hidden costs, and so on. It could also give you a glimpse of what real trading looks like—the thrill of facing real profits or losses, and how will you react to those.

After you reach a level of experience, you should also go back and revisit several of the questions that you answered before, as now you know much more of financial markets and, even more importantly, yourself.

The Real Thing: Dealing With Profits, Risks, And Losses

Are you feeling comfortable, or even bored, trading with paper money? Entering different types of orders and sticking to the rules of your strategies seems easy? Then it’s time to finally begin trading with real money. A whole new world will open up for you; sometimes it will be scary, sometimes it will be rewarding, but it will most certainly different from paper trading. On a side note, this doesn’t mean you should forget your demo account, though; you can still use it to test new methods and strategies, risk-free!

Before you start trading, you have to remember that risk is a natural part of this business, and that you will inevitably have losing trades. If you have sound strategies, and proper risk management, those won’t cause you much trouble, and most of the times you will be dealing with winning trades and looking for new opportunities.

The effect of compounded returns, the flexibility of trading, and the additional expertise that you will be able to harness in your business and personal life will be well worth your efforts. We urge you to join us on this exciting trip and dive into the art of trading using our comprehensive guide.

Continue with the next lesson: What Can You Achieve With Trading?

Images from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 229 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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3 Comments

3 Comments

  1. DamonEvans

    March 31, 2017 at 12:36 am

    Thanks. Very basic 101. How about explaining the various strategies to employ?

    • DamonEvans

      March 31, 2017 at 12:40 am

      It’s a great intro for a newbie. But I’d be keen on a piece aimed at people like me that have dabbled in trading, as well as invested in equities and crypto. For me I’d like to learn more about trading strategies, something I have lacked in the past. A 101 on making charts and technical analysis would be welcome too. Thanks heaps

      • Mate Cser

        March 31, 2017 at 11:10 am

        Hi, DamonEvans! Thanks for the nice words. Don’t worry we will get to specific trading strategies soon, stay tuned!

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Analysis

Crypto Capitulation Is Upon Us

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Capitulation: kuh-pich-uh-LEY-shuhn (noun) the action of surrendering or ceasing to resist.

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From their December peak, cryptocurrency assets have given back over $400 billion. This amounts to more than the GDP of many countries.  If this were values lost in the stock market whose worth is in the trillions, it would be called a minor correction. In crypto terms there is only one word to describe the carnage: capitulation.

As painful as it is, the point to be made here is the capitulation is a good thing.  Read on and I will share some thoughts for you to consider.

Mass Media Mania

First let’s take a look at some of the news that is causing such despair. Most recently the selling mania has been in response first to Facebook and more recently to Google.  Both of these mass social media giants have ban cryptocurrency advertising. Read closely and you won’t be shocked to realize that the target of their ire are the many ICOs.

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The problem is not that Facebook and Google are the only advertising platforms.  The problem is that they are considered mainstream media and without these two, the trend of cryptocurrencies gaining legitimacy is delayed.  That is right, I said delayed not blocked or prevented.

The World Has Changed

Five years ago, when bitcoin was unknown to most people, this might have been a fatal move. Today is a different story. I recently traveled to a remote mountain town in the interior of Mexico.  Everyone I met had heard about Bitcoin and eyes lit up with excitement when I ask if I could pay for lunch with bitcoin.  

Today are dozens of websites dedicated to cryptocurrencies, either holding them, exchanging them or just writing about them.  Probably the most effective advertising remains on Google, it is called Google Search and it is free.

If someone wants to learn about owning bitcoin or any other currency, there is a ton of educational information.

Of course it would be far better all around if Mark Zuckerberg and Eric Schmidt had taken a different approach such as banning only advertisements for ICOs, but that didn’t happen so supporters of crypto aren’t comforted in their beliefs that bitcoin is going mainstream in 2018.

The Flipside Is Being Ignored

Every argument has a flip side.  If the removal of ads contributes to cleaning up ICO scams, that is a good thing.  We can all agree on that point. And let’s be honest there is more than one problem the crypto community needs to clean up.

This adds to the ongoing regulatory news including March 7th ruling in US Federal District Court that cryptocurrencies are commodities.  As such they can be regulated by the Commodity Futures Trading Commission (CTFC).

On the same day the Securities & Exchange Commission issued the following order:

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the commission said in its “Statement on Potentially Unlawful Online Platforms for Trading Digital Assets.”

Not All Regulation Is Inherently Bad

The mere hint of added government regulation typically sends stock market investors heading for the exits and the same holds for investors in crypto.  But this raises the question, is some regulation of crypto a good thing?

If we examine the full spectrum of regulation to this point on a global scale there is one common target most everywhere.  That is the practice of exchanges. So far there has been little or not regulation, threatened or enacted, to protect investors from loss of funds due to security breaches.  

The question that needs to be ask is this.  Will SEC regulation result in better pricing and lower trading costs; if So, then this would provide a desirable outcome.  It is understandable if you laugh at the prospect of any government regulation having a beneficial outcome, but if you look at past SEC practices, you would come away with different conclusion.

So when the next regulation catches the headlines will it be to ban the existence of bitcoin, Ethereum, Ripple, Litecoin and others or to protect the investor from scams and excess costs?

Capitulation Is A Good Sign

Over the course of a pretty long investment experience, I have witnessed true misery on more than one occasion.  The pain is unbelievable, there is no perspective on the future and all you want is to take action to end the misery.  That is when you know the worst is happening and nothing is ever going to make it better. That is when major stock market bottoms are formed. It surely is painful these days for crypto investors. This is a good sign.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 61 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Altcoins

What’s Behind Cardano’s Rising Popularity in South Korea?

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Cardano, better known as ADA in South Korea, pronounced as “aeda” in the local market, is growing at an exponential rate due to UpBit.

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UpBit, South Korea’s second largest cryptocurrency exchange behind Bithumb, is operated by Dunamu, a subsidiary company of Kakao, the operating company of KakaoTalk and KakaoPay. The two mobile applications, KakaoTalk and KakaoPay, have a market penetration rate of over 90 percent in their respective markets–financial technology (fintech) and messaging.

Although UpBit remains as the only cryptocurrency exchange that has integrated Cardano within the local South Korean cryptocurrency exchange market as of date, the popularity of Cardano on UpBit is increasing rapidly. According to CoinMarketCap, 75 percent of Cardano’s daily trading volume is processed in South Korea, by UpBit.

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Within its debut month, more than 3 million South Korean users signed up to use KakaoPay, the country’s most widely utilized fintech app. KakaoPay operates as a mobile bank, allowing users to send and receive money, obtain loans, and conduct financial activities. KakaoPay supports UpBit because a subsidiary company of Kakao in Dunamu operates UpBit.

Given that Cardano is one of the most popular cryptocurrencies on UpBit in terms of daily trading volume, naturally, as general consumers in the traditional finance market using KakaoTalk and KakaoPay move to the cryptocurrency market, the first few cryptocurrencies they are introduced to are bitcoin, Ethereum, and Cardano.

Cardano is also receiving significantly more mainstream and local media coverage than other alternative cryptocurrencies, specifically because the South Korean media has portrayed Cardano as a direct competition to Ethereum. Because Cardano is a smart contracts protocol, it is structurally similar to Ethereum.

The two key differences between Cardano and Ethereum are that Cardano uses a proof-of-stake (PoS) consensus algorithm and it also has two layers that are used for smart contracts processing and payment settlement.

In South Korea, cryptocurrency mania has swept across most major industries. 5 out of 10 people on the streets, in subways, buses, and cafes talk about bitcoin, cryptocurrency, and blockchain technology on a regular basis. As such, the majority of investors are more technical than other regions.

Most investors of Ethereum in South Korea understand that the Ethereum Foundation and its open-source development team has been planning a PoS update via Casper. When Cardano debuted with a PoS protocol, it led South Korean investors to believe Cardano is a more innovative platform and has a technical edge over Ethereum.

January 31

For cryptocurrencies with strong followers in the South Korean market, January 31 is an important date to keep track. On January 31, local cryptocurrency exchanges are expected to open account registrations to new users and six major local banks are set to provide banking services to cryptocurrency exchanges.

Consequently, on January 31, it is likely that a massive amount of Korean won will flow into the local cryptocurrency exchange market. The recent cryptocurrency exchange ban fiasco, which turned out to be false, further increased the presence and popularity of cryptocurrencies in South Korea.

Cryptocurrencies like Cardano, EOS, Qtum, and Ethereum that have strong bases in South Korea will likely increase in value throughout late January and early February.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.4 stars on average, based on 3 rated postsJoseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.




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Fidelity Investments is Mining Cryptocurrency

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Fidelity Investments is a multi-billion dollar brokerage  that just so happens to be mining cryptocurrency. In fact, it has been at it for three years, using its own computers to harvest bitcoin and Ethereum.

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Profitable Experiment

CEO Abby Johnson recently told Fortune that its U.S.-based mining operation is “making a lot of money.” This comes despite running a relatively modest operation.

Hadley Stern, Senior VP of Fidelity Labs, described his company’s venture as an “experiment.”

The real reason we began mining, and still do, is to learn how the network works, how consensus works, how difficulty levels work,” he said in reference to the mining process.

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The key to profitability has been the dramatic rise in cryptocurrency over the past year. Bitcoin and Ethereum are the world’s No. 1 and 2 cryptocurrencies by market capitalization, and no-one else comes close.

Well Ahead of the Pack

The fact that Fidelity has been at this for three years speaks volumes about the company. Other, much bigger players are still dipping their toes in the market, but are unsure about how to proceed. Goldman Sachs is reportedly on the fence about starting a cryptocurrency trading operation, while J.P. Morgan has already begun handling customer orders for bitcoin-based instruments.

Fidelity is doing a lot more than just mining tokens. Earlier this year, it reached an agreement with Coinbase to let customers view cryptocurrency prices alongside other assets on their Fidelity homepage.

Coinbase is the world’s most funded cryptocurrency exchange with more than 7.4 million users.

Cryptocurrency Prices

The cryptocurrency market ended the week on a firm note, with bitcoin (BTC/USD) reaching a session high of $4,425.00. At press time, the index was up 1.6% at $4,368.

Ether is also trading higher against the dollar, with the ETH/USD rallying more than 3% to $305.

Ripple (XRP) lost momentum on Friday, but still managed a weekly gain of 21%.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 344 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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