What is Online Trading?
Trading online is one of the trendiest activities in the last years. Trading is very popular not only among traders in the financial markets but also in the sports betting ones.
There are lots of people interested in the trading and betting systems.
Particularly in sports there is a huge interest among the sports bettors to apply the trading techniques to those markets.
This article, however, is about trading in the financial markets.
Before we continue we should have one thing quite clear: trading is quite different that investing since both concepts deal with different things.
When we talk about investing is when we consider what to do with our savings with long-term projects, whether it is real state, bonds, bank deposits or stocks.
On the contrary trading implies that we are going to do a more “commercial” activity since the word “trade” means exchange.
As you can notice one thing is to exchange and another is to invest.
The shop owner who sells shoes is not investing in shoes but dealing with them.
Probably years ago he invested in a shop to be able to “trade” those shoes.
This is why we should have clear that when we see phrases like: “investing in futures”, “investing in Forex”, “invest in CFDs”, “invest in binary options”, etcetera, we are dealing with fake concepts since there is no such a thing as investing in those activities.
You do not invest in futures, Forex, CFDs or binary options, since those markets do not present the necessary conditions to invest.
When we buy a 1 hour binary option for the EURUSD we are trying to do short-term trading not any purposeful investing.
Trading and exchange
There is one detail quite important to take into account.
When the shop owner sells shows it is normally at a profit.
He busy shoes for 10 and sells them for 20.
With the profits he will try to pay the rent, employees, energy, cleaning and all related costs and have enough to make some profit for him.
Trading and commerce in the financial markets do not work that way, at least for the retail trader, since we are going to have lots of losing operations.
In a normal situation, in which the price can go in both directions and we are willing to take the same profit as loss, we should lose, at least, half of the times, although they will be more eventually.
Therefore we can see that financial trading has disadvantages in respect to selling shoes or any other typical product.
People in the street think that it is very easy to make money trading somehow but they are completely wrong.
It is very complicated to make money doing trading for the long-term. On the contrary shop owners are normally able to make constant profit.
Trading not only has some inherent huge costs but the markets behave in such a way that most traders who lose in the short-term markets have no clue what hit them.
You have to do very well to be able to be a good short-term trader if there is such a thing actually.
The typical phrase that says that 95% of traders lose is not a joke after all.
Investing in trading
Therefore, it is good that you have quite clear what you will encounter when you face the world of trading.
Whether you have to sell the EURJPY or buy a copper CFD you will be doing trading and not investing at all.
Something else is when you try to buy a system that promises a 10% monthly profit with some sort of automated trading.
In that case you are trying to invest in some digital product searching for some results.
Although that does not mean that those promises are true.
Normally if it is good to be true then it is not true.
In the last case I can tell you there will not be any system capable of giving you 10% monthly profit constantly.
Therefore investing in trading and related products is not a safe activity either.
The same as trading itself we have to be very good when choosing some “provider”.
Trading as profession
Now I will explain you some other theme related with trading that explains quite well the difficulties of such a system as an activity since it is something that falls under the umbrella of “betting”.
You know: something like slots, casinos or betting shops.
As you may deduct those places are not the kinds you think you can look for jobs as “trader” or “bettor”.
Because if you are a professional trader why would you be looking for jobs as “trader”?
That is obviously an oxymoron, something ridiculous.
You can look jobs as a chef, builder, accountant, retail, and etcetera.
However you do not look for jobs as trader.
Those jobs do not exist.
The ones that exist, like those of proprietary trading, are in the majority of cases a “cheap” scam. They will ask you to “form you as a trader”.
Trading is very different from a typical labour activity.
The typical activities are those of producers and trading is an activity of consuming.
Can you spot the difference?
As a consumer activity related to betting what you can achieve is to become a professional bettor.
But that is a different story.
And not an easy one actually.
At least not in the most popular of all trading niches nowadays: day trading.
Fortunately there are other ways of approaching trading where we can use our logic weapons in a more constructive way.
This other ways are more similar to long-term trading such as trend trading or swing trading.
To understand this issue better we had better read some of the interviews of the best traders of their time such as Martin Schwartz, David Ryan, William O’Neill, Michael Steinhardt, Larry Hite, Ed Seykota, Bruce Kovner, Paul Tudor Jones, Michael Marcus, Gil Blake, Richard Driehaus, William Eckhardt o Randy Mckay.
If you read between the lines you will comprehend that the best opportunities to do true trading lie in different time frames than day trading.