Trading as it self
What is trading:
Trading is the process of buying/selling of currencies, securities or commodities with the aim of making a profit. Official participants in this trade are traders who buy financial instruments when they fall in price and sell when the price rises again. At the same time, traders do not “guess” when to sell at a higher price, but analyze the market to make a decision.
Types of trading:
Trading is divided into types based on the time during which the position (transaction) is held. 1. High-frequency trading – trades last less than a second and only robots trade.
2. Scalping. The time to hold a position is calculated in seconds and several minutes. In this case, the trader buys and sells assets with minimal price fluctuations - we are talking about minutes, sometimes even seconds between opening and closing positions.
3. Day trading. This type of trading is also called intraday trading. The trader opens positions in the morning and closes them in the evening, conducting all transactions in one day.
4. Swing trading. The position is held for more than one day. Usually - from several days to several months. This type of trading is based on the cyclical nature of asset price fluctuations. The main idea is to recognize the beginning of the cycle in time and sell assets at the peak of their value.
5. Medium and long-term trading. This method is for those traders who catch long fluctuations. They hold positions for many weeks and months.
6. Long-term investing. This is a type of buy and hold trading. Typical for the stock market.
Traders strategies:
Traders Strategies In addition to the time approach, traders also differ in their strategies for buying and selling assets. They are often called "bulls" and "bears" - depending on what strategy they follow.
“Bulls” are traders who actively buy cheap assets in order to later sell them at a higher price. The choice of this particular animal to represent buyers in the stock market is that the bull, as it were, pushes the quotes up with its horns. Therefore, a growing market is usually called a “bull” market.
"Bears" work differently on stock exchanges. They, on the contrary, press the opponent to the ground, that is, in stock market parlance, they play short. Traders sell securities in the expectation that prices will decline in the future. Their job is to sell assets as expensive as possible, wait until the stock price drops to a minimum, and start buying them again. When there is an active sale of assets, the market is called “bearish”.
These categories of traders are the main market participants. But it's easy to find other animals in the stock market.
"Wolf" is the name given to experienced traders who have been through thick and thin and market crashes. These are successful market players who have an effective strategy, are able to control their emotions, will not make impulsive decisions and panic at the slightest fluctuations in the exchange rate.
"Sheep" is the name given to inexperienced players who are just starting to work in the market and are extremely cautious. Such traders do a lot of analysis, forecasting and always double-check the data. They doubt until the last minute and very often miss the opportunity to make money.
"Hare" are traders who engage in scalping and short selling, preferring to open a large number of positions over a short time period. Such traders play on exchange rate instability.
"Pig" is often the name given to market participants who cannot stop in time and take what they have. They don’t have a feeling of fear; they want to get everything at once, and it doesn’t matter to them at all at what cost. Uncontrolled greed and the desire to grab a piece lead to losses.
Risks of trading:
The financial risks that every trader bears are an integral part of trading. Traders most often work with large sums of money, which can bring both huge profits and large losses. There are several types of risk:
Market risk is associated with asset volatility. Prices of trading instruments are in constant motion during the trading session. In this case, there is a significant probability that quotes will move in the direction opposite to the open position. Taking risks into account in this case helps limit the potential amount of losses.
Currency risk at first glance, this risk is not directly related to the price of the instrument. However, changes in exchange rates necessarily affect all quotes. As a result, situations are possible when the price of an asset also changes in a direction unfavorable for the trader. An example would be trading in gold or shares of foreign companies when the dollar/ruble exchange rate changes. The fall of the latter reduces the attractiveness of buying metal and securities for the national currency.
What are candles in trading?
Candles are a graphical representation of price dynamics in the market. They consist of a body and shadows that show the range of price changes over a certain period of time. The color of the candle indicates the direction of price movement for this period: green - growth, red - fall. Using candlestick analysis, traders can identify trends in the market and make decisions to buy or sell assets.
