In financial markets, millions of companies, individuals, institutions and even governments are all trading at the same time. But what is a trader? A trader is defined as a person who buys and sells financial instruments with the aim of making a profit.
Some traders stick to a particular instrument or asset class, while others have more diverse portfolios. Some do lots of research before placing a trade, while others read charts and watch out for trends.
But trades all have one thing in common – they all carry risk. Risk is a key concept to all types of financial trading. No matter what instrument is being traded, who’s trading it or where the trade takes place, balancing potential profit against risk is key to a successful trading strategy.
No matter what instrument is being traded, who’s trading it or where the trade takes place, balancing potential profit against risk is key to a successful trading strategy.
Further, you need to do a comprehensive analysis of the market you want to trade. There are two types of analysis:
Fundamental analysis
is concerned with all the factors of a company that could have an impact on the stock price of the company in the future. These include financial statements, management processes, and more. The fundamental value of the firm to spot whether the stock is reasonably priced or not is the main objective.
Technical analysis
focuses on the study of financial charts – and using indicators and other tools to identify possible future trends.