Understanding The Financial Markets 101

Understanding The Financial Markets 101

When it comes down to any money-making venture, foreknowledge and preparation are both very critical to success. Knowing this, any attempt to make a proper financial decision without the critical insight of foreknowledge and preparation, can result in mishaps and failures, despite how motivated or determined you might be and the amount you want to invest.

 

Okay, sometimes you can get lucky, but you can get lucky so many times, so why not assess the tools at your disposal and use them to your advantage – like Tradeworks’ complete trading system that allows you to create your own strategies and eliminates your worst enemy – emotion. Having the backstory, no matter what industry you’re trying to propel in, can prove very helpful in guiding you to a successful and permanent strategy. As with everything in life, the more solid your knowledge on your investment is, the more you can expect to get out of it.

 

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Thinking about it, I think that trading the stock market can, in many ways be compared to driving a car – you don’t have to be an expert to get behind the wheel of a car, though you are expected to have some previous knowledge about basic traffic laws, including moving violations, safety regulations, and other legal vehicular infractions, which are learned through either personal study of the topic or through some form of exposure (such as the years you have spent riding in your parents’ or friends’ cars).  When you do get behind the wheel, you should be able to use the basic tools to navigate the car (like know where the breaks are located, where the gas pedal is located, and of course how to use the rearview mirror; knowing that things in the mirror appear closer than they actually are), even if you’ve never driven before.

 

I’ve said this before and I’ll say it again – because it’s the truth. Just like anything you’re trying to solve in real life, the stock market isn’t very different.  While you might not know all the terminology right now, you should certainly be versed in the basic functionality of trading stocks, bonds, securities, and other commodities – whether you’re trading these instruments on your EuropeFX live account or not.  Just like someone who for the first time, is getting ready to push the gas pedal down ideally, you should be approaching the financial markets in the same way – slow and steady.

 

When a person is first learning how to drive, he or she is almost always accompanied by someone more experienced than them who can help make better driving decisions and even sometimes correcting them – always in a constructive manner so they can eventually learn to handle the car on their own.  In the stock world, these ‘driving-instructors’ are for the most part stockbrokers and other experts (like education specialists, market analysts and many more) who can give you input and point you in the right direction to help you develop your knowledge of the market you are interested in, essentially “steering” you toward better decisions and a better understanding of this, not so simple digital world.

 

You could put in hours and even days researching the stock market and it how it works, especially if you’re interested in engaging in the far more complicated Foreign Exchange Market. All of the dirty digging and research has been done for you, compiling all the necessary the data and knowledge into one article for your convenience. To get you started, you can enjoy your morning coffee while reading our EuropeFX Market Review, to get an idea of the market’s daily appetite.

 

Kindly note: The information presented in the EuropeFX Daily Market Review is for educational and informative purposes only and should not be considered as investment or trading advice.

 

 

How Investments Work

Any time you put your money into anything, make sure you fully understand what you’re buying into. The stock market is complicated, and even opening small trading positions requires a basic amount of knowledge, as well as the understanding and acceptance of the risk factor involved.  The more you know before attempting to engage the markets the less likely you are to take a heavy hit.

 

First things first, and perhaps one of the most important factors in the trading industry, you need to understand what stocks actually are and how they function as tradable assets. When you buy or sell a stock, you should keep in mind that you are transacting something real and tangible, not a piece of paper that you will later dispose of. You are partaking in the buying or selling of a real part (share) of that company.

 

Owning that ‘share’ means that you have physically bought a part of the company or product involved and you have now become a partial owner of that company. Think of it as paying for the gas in the car that someone bought for you to drive after passing your driving exam (going back to the example above). You may have even bought the oil filter for that car and perhaps that makes you feel as if you are partially the owner (which you are in a sense). But wait a second, let’s zoom out for a second and take a look at the bigger picture. When you look at the overall cost of the car, what have you really contributed overall? Very little. However, as long as you continue to invest in the car, you can claim part ownership.

 

The value of a company and its products or services fluctuate continuously (the movement every trader is looking for). When the price per share drops and is considered low for some investors it’s one of the ideal times to purchase.  This is the least expensive way to embark on your trading experience. Working with a financial broker will additionally allow you to have continuous access to more information regarding what stocks should be on your radar.

 

 

Disclaimer:

This article is for educational and informative purposes only and should not be considered as investment or trading advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.99% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Find more details about risk here.

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