Trading: What Is It Like?
Among ways to make money online, trading has become one of the most attractive. It allows to start with a little investment and turn it large. You may trade Forex currency pairs, binary options, contracts for difference, and other trading options available online to all the investors. But how to explain what trading is like to someone who has never tried it?
photo/ Gerd Altmann
Trading is a Science
When a scientist conducts an experiment, it consists of several stages that apply to trading as well. Let’s see these stages.
- Observation. First, you observe the market – not only, say, currency pairs, but also internal and foreign affairs of corresponding states. And you see that, say, Malaysian ringgit was being devalued since May 25.
- Then you ask a question: how does it happen? What happens in Malaysia and the rest of the world? Why it ringgit
- Hypothesis. Given the observation, you may assume that USD-MYR rate will grow as the ringgit gets lower. If no disaster or crisis happens, the decline will be slow and steady.
- Prediction. You may predict for yourself that, say, ringgit is going to weaken further for at least a week. But as some economists say it’s undervalued, it may be unreasonable to look further.
- Test the prediction and short a certain amount of ringgit (that is, borrow and sell it now for its current rate to rebuy later cheaper). If your prediction is true, you will gain some money from it.
- Iterate. In trading, it means that you estimate how correct your estimations were.
You see how the rules of a scientific experiment apply. It’s the same when it comes to research: you learn terms, you enrich your vocabulary to name things and relations specific to this industry, you apply common logic to make conclusions, and you admit you may finally be wrong. And if suddenly you are wrong, you can make it right by learning from your mistakes.
Trading as an Art
Within this scientific method, there are some unknown values. What to expect? What currency pairs or other assets to choose to make plausible conclusions? How to choose terms? There are many irrational things that come to the deepest part of your mind, like artistic images. Getting them out of there into real life – that’s art. Making an unreasoned but profitable deal – that’s art.
Trading as a Gambling
The most scandalous thing about knowledge is that it’s always insufficient. At least, your knowledge. But that does not always stop you from making decisions without relying on ratio at all. It’s like entering a casino and making bets in hope of luck. By the way, most traders that don’t give enough time to learning are, in fact, gamblers.
Trading as a Way of Life
The final warning is that all these aspects of trading will form a large part of your life (unless you give up from the start). You will find yourself monitoring signals in the night, watching the news, and reflecting on how it impacts rates and prices, and your lexicon will accept a lot of new words. Are you ready to live it? Aware, alert, operating large sums and amounts, thinking global? In the Internet age, you can start right now.
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Author: Trevor Phillips
