March 21, 2021

Helping You Choose The Right Career!

Trading in Forex/Currency, Metal & Stocks

5 min read

Trading in Forex, Stocks, and Gold is a good investment opportunities but initial investment is required for all three. Without investing money, one cannot do real trading.

In the past, people used to buy/sell stocks by contacting their brokers on phone and telling them to make the move. However, to conduct business in a more effective way, trader’s physical presence at stock market building was usually required. Trading was thus a very limited business opportunity.

With the use of internet, stock trading business has rose to a completely new level. Investors can now trade in any stock markets or Forex currency, from the comfort of their home. Numerous companies are providing online trading platforms, which investors can use to trade in a highly secure environment. These programs have a very user-friendly interface and with high security measures, there are zero chances of losing your account to hackers.

Currencies and stock markets of countries including USA, UK, Europe, Australia, Canada, and Japan are usually very stable, so it is a good idea to invest your money in these markets.

To start trading, you need to open an account with a trusted broker. After successful registration, you can deposit funds. You will then receive a software to install in your PC; this program links directly to different trading servers. Some companies also have web-based trading platforms. You can become a day-trader or do long-term investment.

What is day trading?

The term “Day Trading” refers to buying and selling assets on daily bases. Traders make profits every day and do not hold assets for long-term.

How to make profit in this business?

Assume that an investor buys 100 shares of Coca Cola @ $10 per share. In total, he invests 1000 dollars. Price of shares and currencies can make small or big moves, that is: they can increase or decrease. Different factors can have positive or negative influence on one or more assets. Political or financial news are top market movers.

Let’s assume that Coca Cola’s share price increases to $11 in few hours. Now the investor can sell his one hundred shares to make a $100 profit.

100 shares were originally bought for 10 x 100 = $1000 [this is the total money invested.]
Shares were sold for 11 x 100 = $1100 [note that your broker will take a certain amount of commission on each transaction.]

In this assumption, a profit of approximately $100 was made.

When it comes to real trading, things are not this simple. There are various factors to consider before making any trade. Both experience and knowledge are required to make profit in this otherwise ruthless business. Forex trading is a complicated venture.

In the above example, we conveniently assumed an increase in the share price but what if it had decreased to, for instance, $7?

10 x 100 = $1000
07 x 100 = $700

In this case, there is a loss of $300 [if the investor sells his shares.]

This is a risky business. Do not start real trading unless you have gained good experience. Trade in a demo account for few months. Observe the market and search the internet to find financial sites where important news are shown in real time.

Stock Trading

Usually, the share volume is high for financially strong companies. On each trading day, one can expect to see a lot of activity in such companies. Do some research and find such active companies. Check the historical data too. Find how a company had been performing in the last one year.

Just because the share price of a new or small companies is low, does not mean that one should invest money in it. New traders should invest money in strong companies who have a good financial record. Avoid investing in start-up companies. This is a risky business and you can lose all your money a heart-beat.

Buying shares and then selling them for a higher price is one way of making money, but there are other ways too. For instance, one can choose to do long term investment. You can buy shares of companies who make a good annual profit. After a certain time-period, these companies pay a Dividend to their shareholders.

Dividend is part of the profit, which these companies make. These companies share their profit with their shareholders. Other than the dividend, the advantage of long-term investment in financially strong companies is that in time, the value per share increases.

Is investing money to get dividend a good investment?

In countries like Pakistan, where Interest Rate is insanely high, investing money in stocks might not be a good idea. A government institute in Pakistan called “National Savings” is issuing Regular Income Certificates, which has approximately 12% annual profit rate.

In USA and similar countries, interest rate is close to zero, so investing money in Stocks is a much better option in these countries.

Politics is a factor that can directly influence stock as well as the Forex market. Investors need to keep a close eye on the following factors and try to understand how they influence the markets.

1. Positive or Negative Political Development
2. Good or Bad, Economic Data or News about a Company, or Sector [such as: Banking Sector]
3. Increase or Decrease in Interest Rate
4. Changes in Inflation Rate

Forex is good but risky investment option. It is a huge market. Every day on average, traders do business of more than 3 trillion dollars.

Due to different factors, such as the ones mentioned above, a currency can get stronger or weaker. For instance, if US jobless report show that the number of jobless claims has increased significantly then US Dollar will weaken against other currencies. A trader can take advantage of this fluctuation in currency’s strength.

You can also trade in gold. Demand for gold is very high these days and many people consider it a safe investment option. The increase in demand for gold began around the year 2003. From that time on, gold has become a very popular investment opportunity.

When US Dollar is getting weaker against other currencies, many investors choose to sell dollar and buy gold. The rising demand for gold globally is aiding the increase in gold price. Central banks of different nations are also increasing their reserves by buying more gold.

You can choose to invest money in any one of these markets but remember that this is a very risky business. You cannot make profits unless you are willing to gain experience and knowledge in this business.

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