For some, trading is a job. For many others is an entertainment or even an adiction. Maybe there’s a product you use so much that friends or relatives say you should buy stock in the company. Or perhaps you received a windfall and want to invest a sliver of it in the market for fun and, if all goes well, profit.
Trading is viewed as a dream job but the reality is a lot different. Trading is exhausting, stressful and for most people, costly. The vast majority of traders lose money!
It’s an activity we like to advice against. Leave it for the pros! But if you believe you can succeed at it, one more for you!
Can you get rich by trading?
Forex trading may make you rich if you are a hedge fund with deep pockets or an unusually skilled currency trader. But for the average retail trader, rather than being an easy road to riches, forex trading can be a rocky highway to enormous losses and potential penury.
What is trading?
Let’s keep it simple: trading is buying and selling assets. Forex, stocks, bonds, gold, bitcoin, you name it. There are lots of assets you can trade on. You can even trade on sports betting exchanges!
Traders make their decisions of buying or selling an asset based on fundamental or technical analysis. Or both! But the more commonly used technique among traders is technical analysis.
What is fundamental analysis?
Fundamental analysis is a technique for evaluating the value of an asset. For example, looking into the data of a company, finding their sales, profits etc. and coming up with an intrinsic value for that asset.
What is technical analysis?
Technical analysis (also known as charting) is a technique for deciding when to enter or exit a market. It’s a method of analyzing the price history of the asset in order to try and predict it’s future price.
Trading vs investing
Lots of people these days use these terms interchangeably but trading is different from investing. There are many differences but the major one is the investment time frame, trading has a very short time frame, one can enter and exit a position in seconds while investing is done for the longer term, sometimes decades.
Trading is more like gambling. If you want to try it use a simulation account first. If you are serious about making money and preparing your future read our guide on investing for beginners.
We advocate index fund investing for the majority of people. It’s safer and has a much higher probability of success. This article represents the authors opinion and shouldn’t be understood as financial advice.