Mini Guide - 1 Basics of Trading.pdf

Basics of Trading All you need to know about it Our Objectives To Understand what trading is To Know how and what to trade To Discover how to make profit out of it What is Trading? Trading is the act of buying and selling a certain good available in the market to make profits. It is usually spe...

Basics of Trading All you need to know about it Our Objectives To Understand what trading is To Know how and what to trade To Discover how to make profit out of it What is Trading? Trading is the act of buying and selling a certain good available in the market to make profits. It is usually speculative in nature. People trade because of the value of the good. It will always be a zero-sum activity. Okay, but where do you trade? There are two known ways for people to trade: 1. Direct – Person to Person, Buyer to Seller, etc. 2. Indirect – Use of markets and Financial Intermediaries, and etc. What will I trade? In the Financial Markets, we trade securities. Securities are capital instruments issued by firms, entities, and countries to fund their operations. Examples: • Stocks • Bonds • Currencies • Crypto How do you make money from them? Through traditional trading, you make money through adding profit margins on the good. In trading the Financial Markets, you make money through the fluctuation of the security’s value. How do you make money from them? When you expect the value of a security to increase, you BUY/LONG the financial instrument When you expect the value of security to decrease, you SELL/SHORT the financial instrument. Now, explain this to me in FOREX. Unlike any other asset/security, FOREX currencies are not depicted individually. They are done in pairs. Putting one currency against another. Now, explain this to me in FOREX. In Forex, currency pairs are broken down through: Base Currency – First currency appearing in the quote. Quote Currency – Second currency appearing in the quote. Now, explain this to me in FOREX. When you go Long/Buy: You expect the Base Currency to become more valuable/stronger at a future date. When you go Short/Sell: You expect the Quote Currency to become more valuable/stronger at a future date. Time to show an example EURUSD – BUY/LONG EURUSD – SELL/SHORT Our Checklist Know the concept of trading Understand how to make profit out of Forex Ready for the next lesson