Trading defined

Trading involves buying, selling or the exchange of commodities. Understanding how the market works is vital. There are various commodities that can be traded, such as stocks or foreign exchange. 

Stock trading involves buying, holding, selling stocks (or shares) listed on public stock exchanges.  

Forex trading involves buying and selling currencies in the hopes of making profits. 

Making the decision of what you want to trade is an essential part of the process, along with making the decision about the right broker or firm. By doing this, you are establishing exactly the kinds of trade moves you want as well as the kind of expertise you would like to assist to guide your decisions.  

One of the primary steps should be creating a trading strategy. Having a clear plan means that you can avoid making rash decisions. It helps you make logical decisions instead of being ruled by emotion throughout the trading process. 

A specific goal must be set and as a trader you need to factor your asset allocation and diversification into this trading strategy. The way in which you choose to spread your risk is a major determining factor in how you want to trade, along with the types of commodities that you want to trade. 

Decide how much you can afford to lose and include analysis in your trading strategy. A golden rule of trading is that you should only trade an amount of money that you can afford to lose. If you don’t have enough money to trade, don’t force the issue, until you have enough.   

You also have the benefit of being able to use technology to track activities. Stock screening software is great for new investors. The trading platform used should make it simple to trade so you don’t have to spend most of your time staring at computer screens to monitor trades. Ultimately, trading should include well-calculated decisions and as a trader you should avoid over-confidence.