Why is Trading so Relevant in the Current Economy?

Dec 10, 2016 Written by LAT Staff

Never has financial news been more easily and widely available to individuals as it is now. Whether it is news about a Central Bank cutting or raising interest rates, an election result or some other significant global event, this news will always cause a reaction within financial markets.

The UK Brexit decision in June 2016, for example, generated some dramatic but very predictable movements in currency markets and the stock market, but how many individuals actually managed to take advantage of these moves?

Of course you can choose to sit aside and ignore the repercussions of such events, or you can take an active role in trying to understand what is happening and how this news may affect the world in which you live. This knowledge will not only enable you to discuss these global issues with friends and colleagues from a position of deeper understanding, but it may also provide you with an opportunity to profit financially from the resulting fluctuations in financial markets.

Trading can be done around your existing job, but beware of the all-too-common pit-falls that many traders succumb to. If something is worth doing, then it’s worth doing well and the best way to trade well is to take time to learn from experts who know what they are doing and are able to transfer this knowledge.

This may sound strange, but one of the problems with trading is that it is actually possible to double your money in a very short space of time without any training or knowledge. But the fact is that nearly every retail trader who doubles their money in quick time will sooner or later (usually sooner) blow their account down to zero. They fail to appreciate that if they can make 100% profit in a day or a week, then they can make 100% loss in a day or a week.

Trading involves an understanding of fundamental and technical analysis, but most of all you need to be able to control your emotions and manage your risk. Greed and hope are strong emotions which need to be controlled when trading. You need to understand why you act in a certain way, and you need to learn that trading behaviour is different to “normal life” behaviour.

If you want to make some extra money through trading, you should take time to learn how to do it properly, with discipline and structure, with a robust trade plan, with strict processes and organisation, all the while keeping control of your emotions and managing your money in an efficient and productive way. There is a lot to learn, and the cost of ignorance can be very high, but the rewards for knowledgeable traders can be even higher.