What Is Trading And How To Make Money with It

Written by: smm

on: 20/02/2023

Trading is a way to make money in the financial markets. Its main principle is this: you need to buy an asset at a lower price, and sell it at a higher one. 

To trade and snatch profits, you have to learn to pick the right time to enter and exit the market based on analytical data.  

There are two main types of analysis:

— Fundamental analysis 

Close investigation of the economical situation is the cornerstone of fundamental analysis.

— Technical analysis 

This one is about following the trends and keeping an eye on assets, indicators, patterns, etc.  

Types of trading: 

#1. Scalping 

The trader opens a position, waits for minimum profit within a short period of time—which can be between one and five minutes—and closes it right away. If you choose this trading approach, you should be ready for extreme mental pressure and realize that you won’t be able to earn a lot of money at the beginning. 

#2. Medium-term trading 

This trading approach implies the use of hourly, 4-hour, and daily time frames. Professionals recommend those who are only getting started opt for this trading style. Medium-term trading enables you to learn to spot market moves, open and close your trades, get a better grip on your emotions as well as figure out the wave nature of the exchange rate changes. 

#3. Long-term trading 

Long-term trading implies the use of time frames that are longer than one day—typically one week. Monthly or yearly time frames aren’t popular among traders as they aren’t willing to wait that long to reap profits. 

#4. Technical trading 

With this type of trading, we utilize technical analysis. High time frames—4-hour and higher ones—are rarely used in this case. 

#5. Fundamental trading 

Principles of fundamental analysis are at the core of this trading approach. Lower time frames can only be used when trading the news. 

#6. Swing trading

First and foremost, you have to identify the trend. If the exchange rate is rising, you should go long. If it’s dropping, you can only go short, i.e. sell. 

#7. Momentum trading 

With momentum trading, we can use both scalping and medium-term or long-term time frames. 

The statistic suggests that 8 out of 10 traders open their trades being guided by emotions and gut feeling. 

This works in favor of the market players as they are able to make money off of the newbies’ failures and mistakes.

However, knowing various trading styles, you can pick the one that works best for you and you’ll have every chance to succeed!